Division Y has asked Division X of the same company to supply it with 6,600 units of part L763 this year to use in one of its products.Division Y has received a bid from an outside supplier for the parts at a price of $41 per unit. Division X has the capacity to produce26,400 units of part L763 per year. Division X expects to sell 23,760 units of part L763 to outside customers this year at a price of$43.60 per unit. To fill the order from Division Y, Division X would have to cut back its sales to outside customers. Division X producespart L763 at a variable cost of $33 per unit. The cost of packing and shipping the parts for outside customers is $2 per unit. Thesepacking and shipping costs would not have to be incurred on sales of the parts to Division Y.Required:a. What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of6,600 parts this year from Division X to Division Y?Note: Round your final answers to 2 decimal places.Range of transfer prices:

a) Calculating the profits under different transfer price scenarios is necessary to determine the…

Answered: Division Y has asked Division X of the…

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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Division Y has asked Division X of the same company to supply it with 5,600 units of part L763 this year to use in one of its products. Division Y has received a bid from an outside supplier for the parts at a price of $36 per unit. Division X has the capacity to produce 22,400 units of part L763 per year. Division X expects to sell 20,160 units of part L763 to outside customers this year at a price of $37.60 per unit. To fill the order from Division Y, Division X would have to cut back its sales to outside customers. Division X produces part L763 at a variable cost of $28 per unit. The cost of packing and shipping the parts for outside customers is $2 per unit. These packing and shipping costs would not have to be incurred on sales of the parts to Division Y. Required: a. What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of 5,600 parts this year from Division X to Division Y? (Round your final answers…
Division Y has asked Division X of the same company to supply it with 8,400 units of part L763 this year to use in one of its products. Division Y has received a bid from an outside supplier for the parts at a price of $50 per unit. Division X has the capacity to produce 33,600 units of part L763 per year. Division X expects to sell 30,240 units of part L763 to outside customers this year at a price of $54.40 per unit. To fill the order from Division Y, Division X would have to cut back its sales to outside customers. Division X produces part L763 at a variable cost of $42 per unit. The cost of packing and shipping the parts for outside customers is $2 per unit. These packing and shipping costs would not have to be incurred on sales of the parts to Division Y. Required: a. What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of 8,400 parts this year from Division X to Division Y? (Round your final answers…
Division Y has asked Division X of the same company to supply it with 9,000 units of part L763 this year to use in one of its products. Division Y has received a bid from an outside supplier for the parts at a price of $53 per unit. Division X has the capacity to produce 36,000 units of part L763 per year. Division X expects to sell 32,400 units of part L763 to outside customers this year at a price of $58.00 per unit. To fill the order from Division Y, Division X would have to cut back its sales to outside customers. Division X produces part L763 at a varlable cost of $45 per unit. The cost of packing and shipping the parts for outside customers is $2 per unit. These packing and shipping costs would not have to be incurred on sales of the parts to Division Y. Required: a. What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of 9,000 parts this year from Division X to Division Y? (Round your final answers…
Johnson Corp. has two divisions, Division A and Division B. Division B has asked Division A to supply it with 5,000 units of part WD26 this year to use in one of its products. Division A has the capacity to produce 25,000 units of part WD26 per year. Division A expects to sell 21,000 units of part WD26 to outside customers this year at a price of $20.00 per unit. To fill the order from Division B, Division A would have to cut back its sales to outside customers. Division A's variable manufacturing cost (direct labor + direct material + variable overhead) for part WD26 is $12.00 per unit. The variable selling cost when selling to outside customers is $2.00 per unit. This variable selling cost would not have to be incurred on sales of the parts to Division B. Q. Calculate Division A's minimum acceptable transfer price. A. $
Xtra Mechanical, Inc. is a manufacturer of machine parts with locations in the United States. It is considering entering into an eight year supply agreement with a customer where it will supply certain parts to the customer for their products. The project will require Xtra to purchase a new machine at the begining of the project and the cost of the machine is $8,500,000. At the end of the project, the machine is expected to be sold in the used market for 20% of the original cost before paying taver. The five year MACRS depreciation will be used for tax purposes. The depreciate rates are shown below. There is an initial networking capital investment of $15,000 and no further investment in not working capital is required. We assume that all the money tied up in the networking capital account will be recovered by the end of the project Revenues from the contract per year are shown below. Cost of goods sold is expected to be 50% of revenues. In addition to cost of goods seld, the project…
Western Jeans Co. has an annual plant capacity of 2,000,000 units, and current production is 1,920,000 units. Monthly fixed costs are $400,000, and variable costs are $9 per unit. The present selling price is $15 per unit. On July 6 of the current year, the company received an offer from Childs Company for 50,000 units of the product at $13 each. Childs Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Western Jeans Co. Question Content Area a. Prepare a differential analysis dated July 6 on whether to reject (Alternative 1) or accept (Alternative 2) the Childs order. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential AnalysisReject (Alt. 1) or Accept (Alt. 2) OrderJuly 6 Line Item Description Reject Order(Alternative 1) Accept Order(Alternative 2) Differential Effects(Alternative 2) Revenues $Revenues…
Homestead Jeans Co. has an annual plant capacity of 60,300 units, and current production is 47,100 units. Monthly fixed costs are $54,600, and variable costs are $33 per unit. The present selling price is $45 per unit. On November 12 of the current year, the company received an offer from Dawkins Company for 11,000 units of the product at $37 each. Dawkins Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Homoctoad Joans O
Homestead Jeans Co. has an annual plant capacity of 67,000 units, and current production is 45,700 units. Monthly fixed costs are $54,400, and variable costs are $31 per unit. The present selling price is $40 per unit. On November 12 of the current year, the company received an offer from Dawkins Company for 19,600 units of the product at $34 each. Dawkins Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Homestead Jeans Co. Required: A. Prepare a differential analysis dated November 12 on whether to reject (Alternative 1) or accept (Alternative 2) the Dawkins order. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is…
Markland Manufacturing manufactures desk lamps intends to increase capacity by obtaining new equipment. Two vendors have presented proposals. The purchase cost for proposal A is $30,000, and for proposal B, $80,000. Each proposal will produce lamps of the same quality. Proposal A is expected to produce lamps at $15.00/lamp, while proposal B is significantly more efficient and will produce them at $10.00/lamp. The revenue generated by the sale of each lamp is $20.00/unit. A. What is the point of indifference?B. The manufacturer expects to sell 12,000 lamps and has informed the vendors that it has chosen proposal B. The vendor of proposal A has offered to re-negotiate the purchase price of its proposal in order to win the contract. What purchase price will cause the manufacturerto reconsider its decision?
Perennial Company, a manufacturer of decorative pots, expects sales of 500,000 pots at $10 each during the coming year. Variable manufacturing costs are $4 per unit and fixed manufacturing costs are $2.50 per unit. The company received a special order from an overseas customer to purchase 50,000 pots at $6 each. The company has sufficient plant capacity to manufacture this order. However, additional overtime labor costs of $1.00 per pot would be required to produce the pots. No other costs would be incurred as a result of accepting the order. If the special order is accepted, how will operating profit be impacted?
In need of an answer for this please. Thank you!
Heer Enterprises needs someone to supply it with 160,000 cartons of machine screws per year to support its manufacturing needs over the next three years, and you've decided to bid on the contract. It will cost you $840,000 to install the equipment necessary to start production and you estimate that it can be salvaged for $160,000 at the end of the three-year contract. Your fixed production costs will be $290,000 per year, and your variable production costs should be $8.50 per carton. If you require a 12 percent return on your investment, what is the minimum bid price you should submit?

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