Hitachi Philippines has two divisions, A and B. Division A makes a component for air conditioning units which it can only sell to Division B. It has no other, outlets for sales. Current information relating to Division A is as follows: Marginal cost per unit P100 Transfer price of the component 165 Specific fixed costs of Division A per year 10,000 Total production and sales of the 2,200 units component each year 2,200 units Carrier company has offered to sell the component to Division B for P140 per unit. If Divison B accepts this offer, Division A will be shut. If Division B accepts Carrier Company’s offer, what will be the impact on profits per year for the group as a whole?
Hitachi Philippines has two divisions, A and B. Division A makes a component for air conditioning units which it can only sell to Division B. It has no other, outlets for sales. Current information relating to Division A is as follows: Marginal cost per unit P100 Transfer price of the component 165 Specific fixed costs of Division A per year 10,000 Total production and sales of the 2,200 units component each year 2,200 units Carrier company has offered to sell the component to Division B for P140 per unit. If Divison B accepts this offer, Division A will be shut. If Division B accepts Carrier Company’s offer, what will be the impact on profits per year for the group as a whole?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Hitachi Philippines has two divisions, A and B. Division A makes a component for air conditioning units which it can only sell to Division B. It has no other, outlets for sales. Current information relating to Division A is as follows:
|
Marginal cost per unit |
P100 |
|
Transfer price of the component |
165 |
|
Specific fixed costs of Division A per year |
10,000 |
|
Total production and sales of the 2,200 units component each year |
2,200 units |
Carrier company has offered to sell the component to Division B for P140 per unit. If Divison B accepts this offer, Division A will be shut. If Division B accepts Carrier Company’s offer, what will be the impact on profits per year for the group as a whole?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education