Division X of Charter Corporation makes andsells a single product that's used bymanufacturers of forklift trucks. Presently itsells 12,000 units per year to outsidecustomers at $24 per unit. The annualcapacity is 20,000 units, and the variable costto make each unit is $16. Division Y of CharterCorporation would like to buy 10,000 units ayear from Division X to use in its products.There would be no cost savings fromtransferring the units within the companyrather than selling them on the outsidemarket. What should be the lowestacceptable transfer price from the perspectiveof Division X?

Charter Corporation has two Divisions X & Y Division X total Capacity = 20000 units Outside…

Answered: Division X of Charter Corporation makes…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Waterways has discovered that a small fitting it now manufactures at a unit cost of $1.00 could be bought elsewhere for $0.81 per unit. Waterways has unit fixed manufacturing costs of $0.20 that cannot be eliminated by buying this unit. Waterways needs 465,000 of these units each year.If Waterways decides to buy rather than produce the small fitting, it can devote the machinery and labor to making a timing unit it now buys from another company. Waterways uses approximately 400 of these units each year. The cost of the unit is $12.33. To aid in the production of this unit, Waterways would need to purchase a new machine at a cost of $2,344, and the unit cost of producing the units would be $9.40. Without considering the possibility of making the timing unit, evaluate whether Waterways should buy or continue to make the small fitting. The company should (make or buy?) the fitting. Incremental cost / (savings) will be
The Lamar Company manufactures wiring tools. The company is currently producing well below its full capacity. The Boston Company has approached Lamar with an offer to buy 15,000 tools at $1.80 each. Lamar sells its tools wholesale for $1.90 each; the average cost per unit is $1.88, of which $0.32 is fixed costs. If Lamar were to accept Boston's offer, what would be the increase in Lamar's operating profits? Multiple Choice O O $1,500. $5,100. $1,200. $3,600.
Yorkville sells a haircutter at $65 and each unit has variable cost of $25. Yorkville's fixed manufacturing costs are $80,000 when produces at its full capacity of 10,000 units and its its fixed cost per unit is $8 per unit. The company has an offer of 2,000 units at $30 each in an international market, which would not affect its current production but would increase the fixed cost by $5,000. How much is the incremental net income if it accepts the special order? Select one: a. $10,000 profit b. $6,000 loss c. $5,000 profit O d. $70,000 loss
Adams Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Adams produces and sells only 6,200 bikes each year. Due to the low volume of activity, Adams is unable to obtain the economies of scale that larger producers achieve. For example, Adams could buy the handlebars for $30 each; they cost $33 each to make. The following is a detailed breakdown of current production costs. Item Unit-level costs Materials Labor Overhead Allocated facility-level costs Total Unit Cost $15 9 2 7 $33 Total $ 93,000 55,800 12,400 43,400 $204,600 After seeing these figures, Adams's president remarked that it would be foolish for the company to continue to produce the handlebars at $33 each when it can buy them for $30 each. Required Calculate the total relevant cost. Do you agree with the president's conclusion? Answer is complete but not entirely correct. Per Unit Total
The Croydon division of CC Industries supplies the Hauser division with 100,000 units per month of an infrared LED that Hauser uses in a remote control device it sells. The transfer price of the LED is $8, which is the market price. However, Croydon does not operate at or near capacity. The variable cost to Croydon of the LED is $4.80, while Hauser incurs variable costs (excluding the transfer price) of $12 for each remote control. Hauser’s selling price is $32. Hauser’s manager is considering a promotional campaign. The market research department of Hauser has developed the following estimates of additional monthly volume associated with additional monthly promotional expenses. Additional Monthly Promotional Expenses: $80,000 $120,000 $160,000 Additional Monthly Volume (Units) 10,000 15,000 18,000 Q. As the president of CC Industries, what level of spending would you like the Hauser division manager to select?
Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is three units per hour and for Product MTV is five units per hour. The machine’s capacity is 2,600 hours per year. Both products are sold to a single customer who has agreed to buy all of the company’s output up to a maximum of 4,420 units of Product TLX and 5,995 units of Product MTV. Selling prices and variable costs per unit to produce the products follow. $ per unit Product TLX Product MTV Selling price per unit $ 11.50 $ 6.90 Variable costs per unit 3.45 4.14 Determine the company's most profitable sales mix and the contribution margin that results from that sales mix. (Round per unit contribution margins to 2 decimal places.)
Chile’s, Inc. currently produces and sells 4,000 units of a product that has a contribution margin of $6 per unit. The company sells the product for a sales price of $20 per unit. Fixed costs are $18,000. The company has considering investing in new technology that would decrease the variable cost per unit to $8 per unit and increase fixed costs to $33,000. The company expects the new technology to increase production and sales to 9,000 units of product. What sales price would have to be charged to earn a $75,000 target profit? a-$18 b-$22 $c-20 d-$16 e-$8
Lowwater Sailmakers manufactures sails for sailboats. The company has the capacity to produce 25,000 sails per year, but is currently producing and selling 20,.000 sails per year, The following information relates to current production. If a special sales order is accepted for 2,000 sails at a price of $87 per unit, and fixed costs increase by $20,000, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) Sale price per unit $150 Variable costs unit: per Manufacturing Marketing and administrative $60 $20 Total fixed costs: Manufacturing Marketing and administrative S600,000 $200 000 Increase by S14,000 Decrease by S4,000 ) Decrease by S14,000 ) Decrease by S6,000 () Increase by S6,000 ()
The Croydon division of CC Industries supplies the Hauser division with 100,000 units per month of an infrared LED that Hauser uses in a remote control device it sells. The transfer price of the LED is $8, which is the market price. However, Croydon does not operate at or near capacity. The variable cost to Croydon of the LED is $4.80, while Hauser incurs variable costs (excluding the transfer price) of $12 for each remote control. Hauser’s selling price is $32. Hauser’s manager is considering a promotional campaign. The market research department of Hauser has developed the following estimates of additional monthly volume associated with additional monthly promotional expenses. Additional Monthly Promotional Expenses: $80,000 $120,000 $160,000 Additional Monthly Volume (Units) 10,000 15,000 18,000 1. What level of additional promotional expenses would the Hauser division manager choose?
Bonita Company manufactures a product with a unit variable cost of $43 and a unit sales price of $75. Fixed manufacturing costs were $79500 when 7950 units were produced and sold, equating to $10 per unit. The company has a one-time opportunity to sell an additional 1000 units at $54 each in an international market, which would notaffect its present sales. The company has sufficient capacity to produce the additional units. How much is the relevant income effect of accepting the special order? $43000 $1000 $11000 $7950
Chile's, Inc. currently produces and sells 4,000 units of a product that has a contribution margin of $6 per unit. The company sells the product for a sales price of $20 per unit. Fixed costs are $18,000. The company has considering investing in new technology that would decrease the variable cost per unit to $8 per unit and increase fixed costs to $33,000. The company expects the new technology to increase production and sales to 9,000 units of product. ?What sales price would have to be charged to earn a $75,000 target profit S18 $22 () $20 () $16 ()
Bramble Company manufactures a product with a unit variable cost of $41 and a unit sales price of $75. Fixed manufacturing costs were $79800 when 7980 units were produced and sold, equating to $10 per unit. The company has a one-time opportunity to sell an additional 1000 units at $54 each in an international market, which would not affect its present sales. The company has sufficient capacity to produce the additional units. How much is the relevant income effect of accepting the special order? $13000 $41000 $3000 $23940

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