Management of Great Springs Bottled Water Company has asked you, the controller, to develop a transfer pricing system for the company. The Transportation Department of the company sells all of its product to the Bottling Department of the company. Thus the Transportation Department's sales become the Bottling Department's cost of goods sold. In order to determine an optimal transfer pricing system, management would like you to demonstrate what an income statement would look like under a cost, market, and negotiated transfer pricing structure. These various transfer prices are listed below. Cost-based $0.61 Market-based $0.73 Negotiated $0.69 Gallons transferred 279,000 Prepare an income statement for each of the transfer prices by filling in the missing numbers in the provided income statement based on each transfer price and calculate the operating income/loss percentage. Round your answers to the nearest whole number. Great Springs Bottled Water Company Income Statement (Cost-based) Month Ending August 31, 20xx   Transportation Bottling Sales $fill in the blank 1   $287,000   Cost of goods sold 88,499   fill in the blank 2   Gross profit $fill in the blank 3   $fill in the blank 4   Expenses:         Fuel/utility expense $14,000   $3,300   Wages expense 43,100   57,100   Costs allocated from corporate 17,235   15,000   Total expenses $74,335   $75,400   Operating income/(loss) in dollars $fill in the blank 5   $fill in the blank 6   Operating income/(loss) in percentage fill in the blank 7 % fill in the blank 8 %   Great Springs Bottled Water Company Income Statement (Market-based) Month Ending August 31, 20xx   Transportation Bottling Sales $fill in the blank 9   $287,000   Cost of goods sold 88,499   fill in the blank 10   Gross profit $fill in the blank 11   $fill in the blank 12   Expenses:         Fuel/utility expense $14,000   $3,300   Wages expense 43,100   57,100   Costs allocated from corporate 17,235   15,000   Total expenses $74,335   $75,400   Operating income/(loss) in dollars $fill in the blank 13   $fill in the blank 14   Operating income/(loss) in percentage fill in the blank 15 % fill in the blank 16 %   Great Springs Bottled Water Company Income Statement (Negotiated) Month Ending August 31, 20xx   Transportation Bottling Sales $fill in the blank 17   $287,000   Cost of goods sold 88,499   fill in the blank 18   Gross profit $fill in the blank 19   $fill in the blank 20   Expenses:         Fuel/utility expense $14,000   $3,300   Wages expense 43,100   57,100   Costs allocated from corporate 17,235   15,000   Total expenses $74,335   $75,400   Operating income/(loss) in dollars $fill in the blank 21   $fill in the blank 22   Operating income/(loss) in percentage fill in the blank 23 % fill in the blank 24 %

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Management of Great Springs Bottled Water Company has asked you, the controller, to develop a transfer pricing system for the company. The Transportation Department of the company sells all of its product to the Bottling Department of the company. Thus the Transportation Department's sales become the Bottling Department's cost of goods sold. In order to determine an optimal transfer pricing system, management would like you to demonstrate what an income statement would look like under a cost, market, and negotiated transfer pricing structure. These various transfer prices are listed below.

Cost-based $0.61
Market-based $0.73
Negotiated $0.69
Gallons transferred 279,000

Prepare an income statement for each of the transfer prices by filling in the missing numbers in the provided income statement based on each transfer price and calculate the operating income/loss percentage. Round your answers to the nearest whole number.

Great Springs Bottled Water Company
Income Statement (Cost-based)
Month Ending August 31, 20xx
  Transportation Bottling
Sales $fill in the blank 1   $287,000  
Cost of goods sold 88,499   fill in the blank 2  
Gross profit $fill in the blank 3   $fill in the blank 4  
Expenses:        
Fuel/utility expense $14,000   $3,300  
Wages expense 43,100   57,100  
Costs allocated from corporate 17,235   15,000  
Total expenses $74,335   $75,400  
Operating income/(loss) in dollars $fill in the blank 5   $fill in the blank 6  
Operating income/(loss) in percentage fill in the blank 7 % fill in the blank 8 %

 

Great Springs Bottled Water Company
Income Statement (Market-based)
Month Ending August 31, 20xx
  Transportation Bottling
Sales $fill in the blank 9   $287,000  
Cost of goods sold 88,499   fill in the blank 10  
Gross profit $fill in the blank 11   $fill in the blank 12  
Expenses:        
Fuel/utility expense $14,000   $3,300  
Wages expense 43,100   57,100  
Costs allocated from corporate 17,235   15,000  
Total expenses $74,335   $75,400  
Operating income/(loss) in dollars $fill in the blank 13   $fill in the blank 14  
Operating income/(loss) in percentage fill in the blank 15 % fill in the blank 16 %

 

Great Springs Bottled Water Company
Income Statement (Negotiated)
Month Ending August 31, 20xx
  Transportation Bottling
Sales $fill in the blank 17   $287,000  
Cost of goods sold 88,499   fill in the blank 18  
Gross profit $fill in the blank 19   $fill in the blank 20  
Expenses:        
Fuel/utility expense $14,000   $3,300  
Wages expense 43,100   57,100  
Costs allocated from corporate 17,235   15,000  
Total expenses $74,335   $75,400  
Operating income/(loss) in dollars $fill in the blank 21   $fill in the blank 22  
Operating income/(loss) in percentage fill in the blank 23 % fill in the blank 24 %
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