Anstell Corporation operates a Manufacturing Division and a Marketing Division. Both divisions are evaluated as profit centers.Marketing buys products from Manufacturing and packages them for sale. Manufacturing sells many components to third parties inaddition to Marketing. Selected data from the two operations follow:Capacity (units)Sales price*Variable costs +Fixed costsManufacturing250,000$ 318$ 150$ 109,500a. Transfer priceb. Transfer priceMarketing125,000$948For Manufacturing, this is the price to third parties.tFor Marketing, this does not include the transfer price paid to Manufacturing.per unitper unit$ 374$ 729,500Required:a. Current output in Manufacturing is 188,000 units. Marketing requests an additional 63,000 units to produce a special order. Whattransfer price would you recommend?b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend?

In the above case Computation of Transfer Price : Transfer Price = Variable Costs Then…

Capacity (units) Sales price Variable costs + t Fixed costs * Manufacturing 250,000 $318 $ 150 $ 109,500 a. Transfer price b. Transfer price For Manufacturing, this is the price to third parties. t For Marketing, this does not include the transfer price paid to Manufacturing. Marketing 125,000 $948 $374 $ 729,500 Required: a. Current output in Manufacturing is 188,000 units. Marketing requests an additional 63,000 units to produce a special order. W transfer price would you recommend? b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend? per unit per unit

Capacity (units) Sales price Variable costs + t Fixed costs * Manufacturing 250,000 $318 $ 150 $ 109,500 a. Transfer price b. Transfer price For Manufacturing, this is the price to third parties. t For Marketing, this does not include the transfer price paid to Manufacturing. Marketing 125,000 $948 $374 $ 729,500 Required: a. Current output in Manufacturing is 188,000 units. Marketing requests an additional 63,000 units to produce a special order. W transfer price would you recommend? b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend? per unit per unit

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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We sell two products: Product #1 Product #2 Total Sales $200,000 $400,000 $600,000| Variable Expenses 120,000 350,000 470,000 Contribution Margin 80,000 50,000 130,000 CM Ratio 40% 12.5% 21.67% Fixed Expenses total $30,000. What is the breakeven point based on the current sales mix? A. $600,000 B. $75,000 C. $138,440 D. $240,000 4.
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7. Division X produces a single product for both Division Y and an external market. It has spare capacity to produce another 20,000 items. Additional details for Division X are as follows: Information for Division X Price of product sold to outside market Current transfer price Variable cost per item made in division Fixed costs per item (based on budget) Division Y has requested a further 5,000 items. £25 £20 £12 £6 What is the minimum price that Division X should ask per item? (a) £12 (b) £18 (c) £20 (d) £25
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Assume a company makes only three products, A, B, and C. Product A Product B Product C Estimated customer demand in units Selling price per unit 800 700 $ 80 $ 45 Variable cost per unit $ 35 $ 20 Machine-hours per unit 2.5 1.25 The company has only 2.850 machine-hours available. What is the highest total contribution margin that the company can earn if it makes optimal use of its constrained resource? Multiple Choice O O $52.800 $59,800 $55,000 $57,800 600 $ 65 $ 26 3.0
(e) Product Blue Product Red Selling $12.00 $24.00Variable cost $4.00 $8.00Contribution margin $8.00 $16.00Fixed costs apportioned $200,000 $400,00Budgeted Sales Units 140,000 60,000 Calculate the breakeven points, for each product and the company as a whole and comment on your findings f)Discuss the merits and demerits of the cost volume profit analysis (CVP)
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Sales revenue Variable costs: Production Administrative Contribution margin Fixed costs Operating profit Status Quo 45,000 Units $ 1,170,000.0 X S $ $ GA 607,500 X 112,500 X 45,000.0 X $ 292,500.0 X 63,000.0 X S Costs and Revenues (Thousands of Dollars) Alternative 55,000 Units 1,370,000.0 $ 200,000.0 higher Difference 742,500 X 135,000 higher 112,500 X none 515,000.0 $ 65,000.0 higher 292,500.0 X none 128,000.0 $ 65,000.0 higher Required B > < Required A