In the Gold Blue Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below: Case 1 Case 2 Division A: Capacity in units Number of units sold externally Market selling price Variable costs per unit Fixed costs per unit based on capacity 100,000 100,000 100,000 60,000 P75 P90 73 58 10 10 Division B: Number of units needed for production Purchase price per unit from external supplier 40,000 40,000 P86 P74

In the Gold Blue Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below: Case 1 Case 2 Division A: Capacity in units Number of units sold externally Market selling price Variable costs per unit Fixed costs per unit based on capacity 100,000 100,000 100,000 60,000 P75 P90 73 58 10 10 Division B: Number of units needed for production Purchase price per unit from external supplier 40,000 40,000 P86 P74

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 22E: Total cost method of product pricing Based on the data presented in Exercise 17, assume that Smart...

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XYZ Company has two divisions, X and Y. X makes product X1 and Y makes product Y+. Every unit of product Y+ requires one unit of product X1 as a component. Y purchases most of its X1 requirement from X although sometimes it makes purchases from outside suppliers. Relevant details of products X1 and Y+ are tabulated as follows: Product X1 Product Y+ Established selling price $30 $50 Variable Cost Per Unit - Mat 8 5 Transfer price 30 Labor 5 3 Overhead 2 2 Total Variable Cost 15 40 Fixed Costs 500,000 225,000 Annual Outside Demand 100,000 25,000 Plant Capacity 130,000 30,000 Investment in Divisions: (X) $ 6,625,000 (Y) $ 1,250,000 Division Y is currently achieving an ROI below target. It’s manager blames this on the high transfer price of product X1. The manager of Division X claims that the current transfer price ($30) is appropriate since ‘it is determined by the market’. The manager of division…
XYZ Company has two divisions, X and Y. X makes product X1 and Y makes product Y+. Every unit of product Y+ requires one unit of product X1 as a component. Y purchases most of its X1 requirement from X although sometimes it makes purchases from outside suppliers. Relevant details of products X1 and Y+ are tabulated as follows: Product X1 Product Y+ Established selling price $30 $50 Variable Cost Per Unit - Mat 8 5 Transfer price 30 Labor 5 3 Overhead 2 2 Total Variable Cost 15 40 Fixed Costs 500,000 225,000 Annual Outside Demand 100,000 25,000 Plant Capacity 130,000 30,000 Investment in Divisions: (X) $ 6,625,000 (Y) $ 1,250,000 Division Y is currently achieving an ROI below target. It’s manager blames this on the high transfer price of product X1. The manager of Division X claims that the current transfer price ($30) is appropriate since ‘it is determined by the market’. The manager of division…
In each of the cases below, assume Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits. Division X: Capacity in units Number of units being sold to outside customers Selling price per unit to outside customers Variable costs per unit Fixed costs per unit (based on capacity) Division Y: Number of units needed for production Purchase price per unit now being paid to an outside supplier Exercise 11-13 (Algo) Part 1 Complete this question by entering your answers in the tabs below. Req 1A A Req 1B Case Req 1C 110,000 110,000 $50 $25 $ 8 24,000 $43 Required: 1. Refer to the data in case A above. Assume in this case that $2 per unit in variable selling costs can be avoided on intracompany sales. B 107,000 83,000 $28 $19 $5 a. What is the lowest acceptable transfer price from the perspective of the selling division? b. What is…
In each of the cases below, assume that Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits: Division X: Capacity in units Number of units being sold to outside customers Selling price per unit to outside customers Variable costs per unit Fixed costs per unit (based on capacity) Division Y: Number of units needed for production Purchase price per unit now being paid to an outside supplier Transfer price A Yes No 100,000 100,000 1-b. If the managers are free to negotiate and make decisions on their own, will a transfer take place? Transfer price $50 $30 $8 20,000 $47 Case B Required: 1-a. Refer to the data in case A above. Assume that $2 per unit in variable selling costs can be avoided on intracompany sales. Determine the transfer price of the selling division. 100,000 80,000 $35 $20 $6 20,000 $34 2-a. Refer to the data…
In each of the cases below, assume that Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits: Division X: Capacity in units Number of units being sold to outside customers Selling price per unit to outside customers Variable costs per unit Fixed costs per unit (based on capacity) Division Y: Number of units needed for production Purchase price per unit now being paid to an outside supplier Case A B 100,000 100,000 100,000 80,000 $50 $35 $30 $20 $8 $6 20,000 $47 20,000 $34 Required: 1-a. Refer to the data in case A above. Assume that $2 per unit in variable selling costs can be avoided on intracompany sales. Determine the transfer price of the selling division. Transfer price 1-b. If the managers are free to negotiate and make decisions on their own, will a transfer take place? Yes No 2-a. Refer to the data in case B…
Adohai Berhad has 8 units or segments based on product-wise. Each unit deals with different products. The revenue, profits, and the assets of each unit are as shown below:a. Based on IFRS criteria, which units are to be reported as per segmental reporting?Show your calculation for each item and each unit.b. Rank the contribution of each unit to total assets, total revenue and total profit respectively. Which segment should be focused by this company? Justify.
Anstell Corporation operates a Manufacturing Division and a Marketing Division. Both divisions are evaluated as profit centers. Marketing buys products from Manufacturing and packages them for sale. Manufacturing sells many components to third parties in addition to Marketing. Selected data from the two operations follow: Capacity (units) Sales price* Variable costs + Fixed costs Manufacturing 250,000 $ 280 $ 112 $ 100,000 a. Transfer price b. Transfer price Marketing 125,000 $910 For Manufacturing, this is the price to third parties. t For Marketing, this does not include the transfer price paid to Manufacturing. per unit per unit $ 336 $ 720,000 Required: a. Current output in Manufacturing is 150,000 units. Marketing requests an additional 25,000 units to produce a special order. What transfer price would you recommend? b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend?
Anstell Corporation operates a Manufacturing Division and a Marketing Division. Both divisions are evaluated as profit centers. Marketing buys products from Manufacturing and packages them for sale. Manufacturing sells many components to third parties in addition to Marketing. Selected data from the two operations follow: Capacity (units) Sales price* Variable costs + Fixed costs Manufacturing 250,000 $ 280 $ 112 $ 100,000 a. Transfer price b. Transfer price Marketing 125,000 $910 For Manufacturing, this is the price to third parties. t For Marketing, this does not include the transfer price paid to Manufacturing. per unit per unit $ 336 $ 720,000 Required: a. Current output in Manufacturing is 125,000 units. Marketing requests an additional 25,000 units to produce a special order. What transfer price would you recommend? b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend? c. Suppose Manufacturing is operating at 230,000 units. What transfer…
Anstell Corporation operates a Manufacturing Division and a Marketing Division. Both divisions are evaluated as profit centers. Marketing buys products from Manufacturing and packages them for sale. Manufacturing sells many components to third parties in addition to Marketing. Selected data from the two operations follow: Capacity (units) Sales price* Variable costst Fixed costs Manufacturing 250,000 $ 310 $ 142 $ 107,500 a. Transfer price b. Transfer price Marketing 125,000 $940 * For Manufacturing, this is the price to third parties. For Marketing, this does not include the transfer price paid to Manufacturing. Required: a. Current output in Manufacturing is 180,000 units. Marketing requests an additional 55,000 units to produce a special order. What transfer price would you recommend? b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend? per unit per unit $366 $ 727,500
Caribann is a company with the potential to produce 100,000 units of its sole product annually. Caribann's interplay of costs and production capacity prompts an analysis that will guide it in navigating the balance between revenue generation and cost management. The following information is available: Selling price - -----------------------------------------------------$42 per unit Variable manufacturing costs -----------------------------------$24 per unit Fixed manufacturing costs---------------------------------------$360,000 annually Fixed marketing and administrative costs ---------------------$240,000 annually Variable marketing and administrative costs -----------------$4 per unit Required: In attempting to achieve better results in the marketplace, management has been looking at changing the reward system for marketing, distribution and sales personnel. This would result in an increase in variable marketing and administrative costs by $2 per unit, and would reduce fixed…
Caribann is a company with the potential to produce 100,000 units of its sole product annually. Caribann's interplay of costs and production capacity prompts an analysis that will guide it in navigating the balance between revenue generation and cost management.The following information is available: Selling price - -----------------------------------------------------$42 per unit Variable manufacturing costs -----------------------------------$24 per unit Fixed manufacturing costs---------------------------------------$360,000 annually Fixed marketing and administrative costs ---------------------$240,000 annually Variable marketing and administrative costs -----------------$4 per unit Required: Calculate breakeven point in units and the quanity of units which need to be sold to earn a target annual profit of 120000 dollars
Caribann is a company with the potential to produce 100,000 units of its sole product annually. Caribann's interplay of costs and production capacity prompts an analysis that will guide it in navigating the balance between revenue generation and cost management.The following information is available: Selling price - -----------------------------------------------------$42 per unit Variable manufacturing costs -----------------------------------$24 per unit Fixed manufacturing costs---------------------------------------$360,000 annually Fixed marketing and administrative costs ---------------------$240,000 annually Variable marketing and administrative costs -----------------$4 per unit Required: In attempting to achieve better results in the marketplace, management has been looking at changing the reward system for marketing, distribution and sales personnel. This would result in an increase in variable marketing and administrative costs by $2 per unit, and would reduce fixed…