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Garcon Inc. Divisional Income Statements For the Year Ended December 31, 20Y2 Consumer Commercial 1 Total Division Division 2 Sales: 3 14,400 units * $144 per unit $2,073,600.00 $2,073,600.00 4 21,600 units * $275 per unit $5,940,000.00 5,940,000.00 Total sales $2,073,600.00 $5,940,000.00 $8,013,600.00 6 Expenses: Variable: 8 14,400 units * $104 per unit $1,497,600.00 $1,497,600.00 21.600 units x $193° per unit $4,168,800.00 4,168,800.00 10 Fixed 200,000.00 520,000.00 720,000.00 Total expenses $1,697,600.00 $4,688,800.00 $6,386,400.00 11 12 Income from operations $376,000.00 $1,251,200.00 $1,627,200.00 "$150 of the $193 per unit represents materials costs, and the remaining $43 per unit represents other variable conversion expenses incurred within the Commercial Division. Consumer Division is presently producing 14,400 units out of a total capacity of 17,280 units. Materials used in producing the Commercial Division's product are currently purchased from outside suppliers at a price of $150 per unit. The sumer Division is able to produce the materials used by the Commercial Division. Except for the possible transfer of materials between divisions, no changes are expected in sales and expenses.

Garcon Inc. Divisional Income Statements For the Year Ended December 31, 20Y2 Consumer Commercial 1 Total Division Division 2 Sales: 3 14,400 units * $144 per unit $2,073,600.00 $2,073,600.00 4 21,600 units * $275 per unit $5,940,000.00 5,940,000.00 Total sales $2,073,600.00 $5,940,000.00 $8,013,600.00 6 Expenses: Variable: 8 14,400 units * $104 per unit $1,497,600.00 $1,497,600.00 21.600 units x $193° per unit $4,168,800.00 4,168,800.00 10 Fixed 200,000.00 520,000.00 720,000.00 Total expenses $1,697,600.00 $4,688,800.00 $6,386,400.00 11 12 Income from operations $376,000.00 $1,251,200.00 $1,627,200.00 "$150 of the $193 per unit represents materials costs, and the remaining $43 per unit represents other variable conversion expenses incurred within the Commercial Division. Consumer Division is presently producing 14,400 units out of a total capacity of 17,280 units. Materials used in producing the Commercial Division's product are currently purchased from outside suppliers at a price of $150 per unit. The sumer Division is able to produce the materials used by the Commercial Division. Except for the possible transfer of materials between divisions, no changes are expected in sales and expenses.

FINANCIAL ACCOUNTING
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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Garcon Inc. manufactures electronic products, with two operating divisions, Consumer and Commercial. Condensed divisional income statements, which involve no intracompany transfers and which include a breakdown of expenses into variable and fixed components, are as follows:

(refer to pic)

The Consumer Division is presently producing 14,400 units out of a total capacity of 17,280 units. Materials used in producing the Commercial Division’s product are currently purchased from outside suppliers at a price of $150 per unit. The Consumer Division is able to produce the materials used by the Commercial Division. Except for the possible transfer of materials between divisions, no changes are expected in sales and expenses.
 
5A What is the range of possible negotiated transfer prices that would be acceptable for Garcon Inc.?
5B Assuming that the managers of the two divisions cannot agree on a transfer price, what price would you suggest as the transfer price?

Would the market price of $150 per unit be an appropriate transfer price for Garcon Inc.? Explain.

Garcon Inc. Divisional Income Statements For the Year Ended December 31, 20Y2 Consumer Commercial 1 Total Division Division 2 Sales: 3 14,400 units x $144 per unit $2,073,600.00 $2,073,600.00 4 21,600 units x $275 per unit $5,940,000.00 5,940,000.00 Total sales $2,073,600.00 $5,940,000.00 $8,013,600.00 6 Expenses: 7 Variable: 14,400 units x $104 per unit $1,497,600.00 $1,497,600.00 8 9 21.600 units x $193° per unit $4,168,800.00 4,168,800.00 10 Fixed 200,000.00 520.000.00 720,000.00 Total expenses $1,697,600.00 $4.688.800.00 $6.386.400.00 11 12 Income from operations $376,000.00 $1,251,200.00 $1,627,200.00 *$150 of the $193 per unit represents materials costs, and the remaining $43 per unit represents other variable conversion expenses incurred within the Commercial Division. The Consumer Division is presently producing 14,400 units out of a total capacity of 17,280 units. Materials used in producing the Commercial Division's product are currently purchased from outside suppliers at a price of $150 per unit. The Consumer Division is able to produce the materials used by the Commercial Division. Except for the possible transfer of materials between divisions, no changes are expected in sales and expenses.
Transcribed Image Text:Garcon Inc. Divisional Income Statements For the Year Ended December 31, 20Y2 Consumer Commercial 1 Total Division Division 2 Sales: 3 14,400 units x $144 per unit $2,073,600.00 $2,073,600.00 4 21,600 units x $275 per unit $5,940,000.00 5,940,000.00 Total sales $2,073,600.00 $5,940,000.00 $8,013,600.00 6 Expenses: 7 Variable: 14,400 units x $104 per unit $1,497,600.00 $1,497,600.00 8 9 21.600 units x $193° per unit $4,168,800.00 4,168,800.00 10 Fixed 200,000.00 520.000.00 720,000.00 Total expenses $1,697,600.00 $4.688.800.00 $6.386.400.00 11 12 Income from operations $376,000.00 $1,251,200.00 $1,627,200.00 *$150 of the $193 per unit represents materials costs, and the remaining $43 per unit represents other variable conversion expenses incurred within the Commercial Division. The Consumer Division is presently producing 14,400 units out of a total capacity of 17,280 units. Materials used in producing the Commercial Division's product are currently purchased from outside suppliers at a price of $150 per unit. The Consumer Division is able to produce the materials used by the Commercial Division. Except for the possible transfer of materials between divisions, no changes are expected in sales and expenses.
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