Burdeno Appliances has two divisions, Sales and Financing. Sales is responsible for selling Burdeno's inventory and maintainingInventory for future sale. Financing Division takes loan applications, packages loans into pools, and sells them in the financial markets.It also services the loans. Both divisions meet the requirements for segment disclosures under accounting rules.Sales Division had $8 million in sales last year. Costs, other than those charged by Financing Division, totaled $6 million FinancingDivision earned revenues of $2.5 million from servicing loans and incurred outside costs of $3 million. In addition, Financing chargedOperations $900,000 for loan-related fees. Sales manager complained to corporate that Financing was charging 150 percent of thecommercial rate for loan-related fees and that Sales would be better off sending its buyers to an outside lender.Financing's manager replied that although commercial rates could be lower, servicing these loans is more difficult, thereby justifyingthe higher feesRequired:a. What are the reported segment operating profits for each division, ignoring income taxes and using the $900,000 transfer price forthe loan-related fees?b. What are the reported segment operating profits for each division, ignoring income taxes and using a $600,000 ($900,000.150%) commercial rate as the transfer price for the loan-related fees?Complete this question by entering your answers in the tabs below.Required ARequiredWhat are the reported segment operating profits for each division, ignoring income taxes and using the $900,000 transferprice for the loan-related fees?Note: Enter youdanswers in thousandsSales DivisionOperating ProfitaBeavised Burdeno Appliances has two divisions, Sales and Financing. Sales is responsible for selling Burdeno's inventory and maintaininginventory for future sale. Financing Division takes loan applications, packages loans into pools, and sells them in the financial markets.It also services the loans. Both divisions meet the requirements for segment disclosures under accounting rules.Sales Division had $8 million in sales last year. Costs, other than those charged by Financing Division, totaled $6 million. FinancingDivision earned revenues of $2.5 million from servicing loans and incurred outside costs of $3 million. In addition, Financing chargedOperations $900,000 for loan-related fees. Sales' manager complained to corporate that Financing was charging 150 percent of thecommercial rate for loan-related fees and that Sales would be better off sending its buyers to an outside lenderFinancing's manager replied that although commercial rates could be lower, servicing these loans is more difficult, thereby justifyingthe higher feesRequired:a. What are the reported segment operating profits for each division, ignoring income taxes and using the $900,000 transfer price forthe loan-related fees?b. What are the reported segment operating profits for each division, ignoring income taxes and using a $600,000 (-$900.000.150%) commercial rate as the transfer price for the loan-related fees?Complete this question by entering your answers in the tabs below.Required A Required BWhat are the reported segment operating profits for each division, ignoring income taxes and using a $600,000 (- $900,000150%) commercial rate as the transfer price for the loan-related fees?Note: Enter your answers in thousands.Sales DivisionFinancing DivisionOperating Profits

Operating profit is the difference between revenue and costs of the business. Transfer price is the…

Burdeno Appliances has two divisions, Sales and Financing. Sales is responsible for selling Burdeno's inventory and maintaining Inventory for future sale. Financing Division takes loan applications, packages loans into pools, and sells them in the financial markets. It also services the loans. Both divisions meet the requirements for segment disclosures under accounting rules. Sales Division had $8 million in sales last year. Costs, other than those charged by Financing Division, totaled $6 million. Financing Division earned revenues of $2.5 million from servicing loans and incurred outside costs of $3 million. In addition, Financing charged Operations $900,000 for loan-related fees. Sales manager complained to corporate that Financing was charging 150 percent of the commercial rate for loan-related fees and that Sales would be better off sending its buyers to an outside lender Financing's manager replied that although commercial rates could be lower, servicing these loans is more difficult, thereby justifying the higher fees. Required: What are the reported segment operating profits for each division, ignoring income taxes and using the $900,000 transfer price for the loan-related fees? b. What are the reported segment operating profits for each division, ignoring income taxes and using a $600,000 $900.000. 150%) commercial rate as the transfer price for the loan-related fees? Complete this question by entering your answers in the tabs below. Required A Required t What are the reported segment operating profits for each division, ignoring income taxes and using the $900,000 transfer price for the loan-related fees? Note Enter youdanswers in thousands Operating Profita Financing On

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q