Federated Manufacturing Incorporated (FMl) produces electronic components in three divisions: industrial, commercial, and consumer products. The commercial products division annually purchases 10,000 units of part 23-6711, which the industrial division produces for use in manufacturing one of its own products. The commercial division is growing rapidly; it is expanding its production and now wants to increase its purchases of part 23-6711 to 15,000 units per year. The problem is that the industrial division is at full capacity. No new investment in the industrial division has been made for some years because top management sees little future growth in its products, so its capacity is unlikely to increase soon. The commercial division can buy part 23-6711 from Advanced Micro Incorporated or from Admiral Electric, a customer of the industrial division now purchasing 650 units of part 88-461. The industrial division's sales to Admiral would not be affected by the commercial division's decision regarding part 23-6711. Industrial Division: Data on part 23-6711: Price to commercial division Variable manufacturing costs Price to outside buyers Data on part 88-461: Variable manufacturing costs Sales price Other Suppliers of Part 23-6711: Advance Micro Incorporated, price Admiral Electric, price $ 185 155 205 $ 65 95 $ 200 210 Award: 14.32 points Required: 2. Assume that the industrial division's sales to Admiral will be canceled if the commercial division does not buy from Admiral. What would be FMl's unit costs of (a) internal transfer and (b) purchasing from Admiral in this case? Would the correct transfer price change? ** I only need #2-(a) to be solved

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Federated Manufacturing Incorporated (FMl) produces electronic components in three divisions: industrial, commercial, and consumer products. The commercial products division annually purchases 10,000 units of part 23-6711, which the industrial division produces for use in manufacturing one of its own products. The commercial division is growing rapidly; it is expanding its production and now wants to increase its purchases of part 23-6711 to 15,000 units per year. The problem is that the industrial division is at full capacity. No new investment in the industrial division has been made for some years because top management sees little future growth in its products, so its capacity is unlikely to increase soon. The commercial division can buy part 23-6711 from Advanced Micro Incorporated or from Admiral Electric, a customer of the industrial division now purchasing 650 units of part 88-461. The industrial division's sales to Admiral would not be affected by the commercial division's decision regarding part 23-6711. Industrial Division: Data on part 23-6711: Price to commercial division Variable manufacturing costs Price to outside buyers Data on part 88-461: Variable manufacturing costs Sales price Other Suppliers of Part 23-6711: Advance Micro Incorporated, price Admiral Electric, price $ 185 155 205 $ 65 95 $ 200 210 Award: 14.32 points Required: 2. Assume that the industrial division's sales to Admiral will be canceled if the commercial division does not buy from Admiral. What would be FMl's unit costs of (a) internal transfer and (b) purchasing from Admiral in this case? Would the correct transfer price change? ** I only need #2-(a) to be solved

Required 1
Required 2
Assume that the industrial division's sales to Admiral will be canceled if the commercial division does not buy from Admiral.
What would be FMI's unit costs of (a) internal transfer and (b) purchasing from Admiral in this case? Would the correct
transfer price change? (Round your answer to 2 decimal places.)
a.
Unit Cost from Internal Sale
$
0.00 X per unit
b.
Unit Cost if buy from Admiral
$
206.10
per unit
Transfer price change
No

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