Direct material $50 Direct labor 20 Overhead (20% variable) 10 Other information: Sales price 100 SG&A costs (40% variable) 15
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Northern Digital Inc.
The Northern Digital Inc. produces a high-quality computer chip. Unit production costs (based on capacity production of 100,000 units per year) follow:
| Direct material | $50 |
| Direct labor | 20 |
| 10 | |
| Other information: | |
| Sales price | 100 |
| SG&A costs (40% variable) | 15 |
Refer to Northern Digital, Inc. Assume, for this question only, that the Memory Division is operating at a level of 70,000 chips per year. What is the minimum price that the division would consider on a "special order" of 1,000 chips to be distributed through normal channels?
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- Comfort Ride manufactures seats for airplanes. The company has the capacity to produce 100,000 seats per year, but currently produces and sells 75,000 seats per year. The following informatic relates to current production of seats: Sale price per unit $400 Variable costs per unit: \table[[Manufacturing,$230The Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry children or cargo. The trailers have a market price of $103 each. Each trailer incurs $38 of variable manufacturing costs. The Trailer division has capacity for 29,000 trailers per year and has fixed costs of $480,000 per year. 1. Assume the Assembly division of Baxter Bicycles wants to buy 5,200 trailers per year from the Trailer division. If the Trailer division can sell all of the trailers it manufactures to outside customers (and has no excess capacity), what price should be used on transfers between divisions? 2. Assume the Trailer division currently only sells 10,200 trailers to outside customers and has excess capacity. The Assembly division wants to buy 5,200 trailers per year from the Trailer division. What is the range of acceptable prices on transfers between divisions? 1. Transfer price per trailer 2. Transfer price per trailer will be at least but not more thanSell or Process Further Jensen Manufacturing Company makes a partially completed assembly unit that it sells for $36 per unit. Normally, 42,000 units are sold each year. Variable unit cost data on the assembly are as follows: Direct material $10 Direct labor 8 Variable manufacturing overhead 4 The company is now using only 70% of its normal capacity; it could fully use its normal capacity by processing the assembly further and selling it for $41 per unit. If the company does this, material and labor costs will each increase by $2 per unit and variable overhead will go up by $1 per unit. Fixed costs will increase from the current level of $160,000 to $180,000. Prepare an analysis showing whether Jensen should process the assemblies further. Use a negative sign with answer to only indicate a loss from processing assemblies further; otherwise do not use negative signs with your answers. Sell of Process Further Differential Analysis $ Differential revenue Differential costs Direct material…
- The Heating Division of Swifty International produces a heating element that it sells to its customers for $38 per unit. Its unit variable cost is $23, and its unit fixed cost is $8. Top management of Swifty International would like the Heating Division to transfer 15,400 heating units to another division within the company at a price of $31. The Heating Division is operating at full capacity. What is the minimum transfer price that the Heating Division should accept? Minimum transfer price 23IPort Products makes cases for portable music players in two processes, cutting and sewing. The cutting process has a capacity of 115,000 units per year; sewing has a capacity of 150,000 units per year. Cost information follows. Inspection and testing costs $ 47,500 Scrap costs (all in the cutting dept.) 147,500 Demand is very strong. At a sales price of $15.00 per case, the company can sell whatever output it can produce. IPort Products can start only 115,000 units into production in the Cutting Department because of capacity constraints. Defective units are detected at the end of production in the Cutting Department. At that point, defective units are scrapped. Of the 115,000 units started at the cutting operation, 17,250 units are scrapped. Unit costs in the Cutting Department for both good and defective units equal $11.30 per unit, including an allocation of the total fixed manufacturing costs of $264,500 per year to units. Direct…The Dolomite Division of Manila Bay Corp. produces a high-quality crushed synthetic Dolomite. Unit production costs (based on capacity production of 100,000 units per year) follow: Direct material $50 Direct labor 20 Overhead (20% variable) 10 Other information: Sales price 100 SG&A costs (40% variable) 15 Refer to Dolomite Division of Manila Bay Corp. Assume, for this question only, that the Dolomite Division is producing and selling at capacity. What is the minimum selling price that the division would consider on a "special order" of 1,000 Dolomites on which no variable period costs would be incurred? Solution: Direct Material 50 Direct Labor 20 Overhead 10 SG&A 9 Opportunity Cost 5 Total 94 Please explain how to get the opportunity cost of $5.
- Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow: Selling price per unit on the intermediate market $ 136 Variable costs per unit $ 118 Fixed costs per unit (based on capacity) $ 8 Capacity in units 25,000 Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 5,000 speakers per year. It has received a quote of $133 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits. Required: Assume the Audio Division sells only 20,000 speakers per year to outside customers. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? What is the range of…Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:Selling price per unit on the intermediate market $ 80Variable costs per unit $ 62Fixed costs per unit (based on capacity) $ 8Capacity in units 25,000 Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 5,000 speakers per year. It has received a quote of $77 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits.Required: 1. Assume the Audio Division is selling 22,500 speakers per year to outside customers. A. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? B. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? C. What is the…Division A makes a part with the following characteristics: Production capacity in units 15,000 units Selling price to outside customers $30 Variable cost per unit $20 Total fixed costs $60,000 Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Suppose that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into sales to outside customers. What would be the minimum acceptable price that Division A would accept to transfer 5,000 units of the part to Division B? $30 $20 $10 None of the above 2. Jack Sparrow, Inc. produces and sells 20,000 units of Product X each month. The selling price of Product X is $30 per unit, and variable expenses are $21 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $50,000 of the $250,000 in fixed expenses charged…
- The Dairy Division of Concord Corporation produces and sells milk to outside customers. The operation has the capacity to produce 200000 gallons of milk a year. Last year’s operating results were as follows: Sales (150000) gallons $675000 Variable costs 292500 Contribution margin 382500 Fixed costs 100000 Net Income $ 282500 Assume the Dairy Division is operating at capacity. If the Yogurt Division wants to purchase 40000 gallons of milk from the Dairy Division, what is the minimum price that will allow the Dairy Division to maintain its current net income? $1.88 per gallon $4.50 per gallon $1.95 per gallon $2.55 per gallonThe Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry children or cargo. The trailers have a retail price of $103 each. Each trailer incurs $48 of variable manufacturing costs. The Trailer division has capacity for 29,000 trailers per year and incurs fixed costs of $490,000 per year. Required:1. Assume the Assembly division of Baxter Bicycles wants to buy 4,400 trailers per year from the Trailer division. If the Trailer division can sell all of the trailers it manufactures to outside customers, what price should be used on transfers between Baxter Bicycles's divisions?2. Assume the Trailer division currently only sells 9,200 Trailers to outside customers, and the Assembly division wants to buy 4,400 trailers per year from the Trailer division. What is the range of acceptable prices that could be used on transfers between Baxter Bicycles's divisions?Division X makes a part with the following characteristics: Production capacity.. 25,000 units $18 Selling price to outside customers. Variable cost per unit. $11 Fixed cost, total. $100,000 Division Y of the same company would like to purchase 10,000 units each period from Division X. Division Y now purchases the part from an outside supplier at a price of $17 each. Suppose that Division X is operating at capacity and can sell all of its output to outside customers. If Division X sells the parts to Division Y at $17 per unit, the company as a whole will be: Select one: a. better off by $10,000 each period. b. worse off by $20,000 each period. C. worse off by $10,000 each period. d. There will be no change in the status of the company as a whole.
