Desa Waja Berhad is a Malaysian multinational company. It has three operating divisions,Components Division, Goods Division and Products Division. Both Components Divisionand Goods Division are located in Malaysia whereas Product Division is situated inIndonesia.The Components Division produces Part X that is used by the Goods Division. The cost ofmanufacturing PartX is as follows:RMDirect materials10Direct labourVariable overhead3Fixed overhead*20*Based on a practical volume of 200,000 parts.Total costOther costs incurred by the Components Division are as follows:RM500,000RM1 per unitFixed selling and administrativeVariable sellingPart X usually sells for between RM28 and RM30 in the external market. Currently, theComponents Division is selling it to external customers for RM29. The division is capableof producing 200,000 units of the part per year; however, because of a weak economy, only150,000 parts are expected to be sold during the coming year. The variable selling expensesare avoidable if the part is sold internally.The Goods Division has been buying the same part from an external supplier for RM28. Itexpects to use 50,000 units of the part during the coming year. The manager of the GoodsDivision has offered to buy 50,000 units from the Components Division for RM18 per unit.Required:i)Determine the minimum transfer price that the Components Division would accept.Determine the maximum transfer price that the manager of the Goods Divisionii)would pay.iii)Should an internal transfer take place? Why or why not? If you were the manager ofthe Components Division, would you sell the 50,000 components for RM18 each?Explain.

Component Division Good Division Product Division Component Division…

i) Determine the minimum transfer price that the Components Division would accept. Determine the maximum transfer price that the manager of the Goods Division ii) would pay. Should an internal transfer take place? Why or why not? If you were the manager of the Components Division, would you sell the 50,000 components for RM18 each? Explain. iii)

i) Determine the minimum transfer price that the Components Division would accept. Determine the maximum transfer price that the manager of the Goods Division ii) would pay. Should an internal transfer take place? Why or why not? If you were the manager of the Components Division, would you sell the 50,000 components for RM18 each? Explain. iii)

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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Use the information for Desks Unlimited above with the following changes:1. The Computer Desk Division is able to sell at full capacity (15,000 units).2. If there is a transfer between the divisions, the Computer Desk Division will save $50 per unit in Variable Marketing and Shipping costs.Answer the following questions. Show your work and clearly label your answers. a. What is the appropriate Transfer Price range?b. If a transfer is made for $460 per desk, how much better of worse off is the firm?
Required information [The following information applies to the questions displayed below.] Illinois Metallurgy Corporation has two divisions. The Fabrication Division transfers partially completed components to the Assembly Division at a predetermined transfer price. The Fabrication Division's standard variable production cost per unit is $550. The division has no excess capacity, and it could sell all of its components to outside buyers at $770 per unit in a perfectly competitive market. Required: 1. Determine a transfer price using the general rule. Transfer price
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Carol Components operates a Production Division and a Packaging Division. Both divisions are evaluated as profit centers. Packaging buys components from Production and assembles them for sale. Production sells many components to third parties in addition to Packaging. Selected data from the two operations follow: Capacity (units) Sales price Variable costsb Fixed costs a For Production, this is the price to third parties. b For Packaging, this does not include the transfer price paid to Production. Suppose Production is located in Country A with a tax rate of 30 percent and Distribution in Country B with a tax rate of 10 percent. All other facts remain the same. a. Optimal transfer price b. Transfer price c Transfer price Required: a. Current output in Production is 25,300 units. Packaging requests an additional 5,960 units to produce a special order. What transfer price would you recommend? to search b. Suppose Production is operating at full capacity. What transfer price would you…
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ats Assume a company has three products-A, B, and C-that emerge from a joint process. The joint processing costs that are incurred up to the split-off point equal $1,200,000. The selling prices and outputs for each product at the split-off point are as follows: Product A B С Selling Price $33 per pound $29 per pound $24 per pound Product A B C Each product can be processed further beyond the split-off point. The additional processing costs for each product and their respective selling prices after further processing are as follows: Output 14,000 pounds 18,000 pounds 19,000 pounds Additional Processing Costs $65,000 $72,000 $88,000 Selling Price $37 per pound $34 per pound $30 per pound The company is trying to decide whether to retain or discontinue the entire joint manufacturing process. What is the financial advantage (disadvantage) of continuing to operate the entire joint manufacturing process?