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Hamlet Industries is organized into two divisions, Fabrication and Finishing. Both divisions are considered to be profit centers, and the two division managers are evaluated in large part on divisional income. The company makes a single product. It is manufactured in Fabrication and then packaged and sold in Distribution. There is no intermediate market for the product. The monthly income statements, in thousands of dollars, for the two divisions follow. Production and sales amounted to 32,400 units. Revenues Variable costs Contribution margin Fixed costs Divisional profit Fabrication ($000) $ 4,860 3,888 $ 972 800 Distribution ($000) $ 8,100 5,994 $ 2,106 1,306 $ 172 $ 800 Assume there is no special order pending. Required: a. What transfer price would you recommend for Hamlet Industries? b. Using your recommended transfer price, what will be the income of the two divisions, assuming monthly production and sales of 32,400 units? c. The manager of the Fabrication Division complains about the transfer price, saying that division profits are unfairly low. The two division managers meet and negotiate a transfer price of $148. What will be the income of the two divisions, assuming monthly production and sales of 32,400 units. Complete this question by entering your answers in the tabs below. Required A Required B Required C Using your recommended transfer price, what will be the income of the two divisions, assuming monthly production and sales of 32,400 units? Note: Enter your answers in whole dollars not in thousands of dollars. Revenue Variable costs Contribution margin Fixed costs Divisional profit Fabrication Distribution < Required A Required C >

Hamlet Industries is organized into two divisions, Fabrication and Finishing. Both divisions are considered to be profit centers, and the two division managers are evaluated in large part on divisional income. The company makes a single product. It is manufactured in Fabrication and then packaged and sold in Distribution. There is no intermediate market for the product. The monthly income statements, in thousands of dollars, for the two divisions follow. Production and sales amounted to 32,400 units. Revenues Variable costs Contribution margin Fixed costs Divisional profit Fabrication ($000) $ 4,860 3,888 $ 972 800 Distribution ($000) $ 8,100 5,994 $ 2,106 1,306 $ 172 $ 800 Assume there is no special order pending. Required: a. What transfer price would you recommend for Hamlet Industries? b. Using your recommended transfer price, what will be the income of the two divisions, assuming monthly production and sales of 32,400 units? c. The manager of the Fabrication Division complains about the transfer price, saying that division profits are unfairly low. The two division managers meet and negotiate a transfer price of $148. What will be the income of the two divisions, assuming monthly production and sales of 32,400 units. Complete this question by entering your answers in the tabs below. Required A Required B Required C Using your recommended transfer price, what will be the income of the two divisions, assuming monthly production and sales of 32,400 units? Note: Enter your answers in whole dollars not in thousands of dollars. Revenue Variable costs Contribution margin Fixed costs Divisional profit Fabrication Distribution < Required A Required C >

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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Hamlet Industries is organized into two divisions, Fabrication and Finishing. Both divisions are considered to be profit centers, and the two division managers are evaluated in large part on divisional income. The company makes a single product. It is manufactured in Fabrication and then packaged and sold in Distribution. There is no intermediate market for the product. The monthly income statements, in thousands of dollars, for the two divisions follow. Production and sales amounted to 32,400 units. Revenues Variable costs Contribution margin Fixed costs Divisional profit Fabrication ($000) $ 4,860 3,888 $ 972 800 Distribution ($000) $ 8,100 5,994 $ 2,106 1,306 $ 172 $ 800 Assume there is no special order pending. Required: a. What transfer price would you recommend for Hamlet Industries? b. Using your recommended transfer price, what will be the income of the two divisions, assuming monthly production and sales of 32,400 units? c. The manager of the Fabrication Division complains about the transfer price, saying that division profits are unfairly low. The two division managers meet and negotiate a transfer price of $148. What will be the income of the two divisions, assuming monthly production and sales of 32,400 units. Complete this question by entering your answers in the tabs below. Required A Required B Required C Using your recommended transfer price, what will be the income of the two divisions, assuming monthly production and sales of 32,400 units? Note: Enter your answers in whole dollars not in thousands of dollars. Revenue Variable costs Contribution margin Fixed costs Divisional profit Fabrication Distribution < Required A Required C >
Transcribed Image Text:Hamlet Industries is organized into two divisions, Fabrication and Finishing. Both divisions are considered to be profit centers, and the two division managers are evaluated in large part on divisional income. The company makes a single product. It is manufactured in Fabrication and then packaged and sold in Distribution. There is no intermediate market for the product. The monthly income statements, in thousands of dollars, for the two divisions follow. Production and sales amounted to 32,400 units. Revenues Variable costs Contribution margin Fixed costs Divisional profit Fabrication ($000) $ 4,860 3,888 $ 972 800 Distribution ($000) $ 8,100 5,994 $ 2,106 1,306 $ 172 $ 800 Assume there is no special order pending. Required: a. What transfer price would you recommend for Hamlet Industries? b. Using your recommended transfer price, what will be the income of the two divisions, assuming monthly production and sales of 32,400 units? c. The manager of the Fabrication Division complains about the transfer price, saying that division profits are unfairly low. The two division managers meet and negotiate a transfer price of $148. What will be the income of the two divisions, assuming monthly production and sales of 32,400 units. Complete this question by entering your answers in the tabs below. Required A Required B Required C Using your recommended transfer price, what will be the income of the two divisions, assuming monthly production and sales of 32,400 units? Note: Enter your answers in whole dollars not in thousands of dollars. Revenue Variable costs Contribution margin Fixed costs Divisional profit Fabrication Distribution < Required A Required C >
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