Materials used by Square Yard Products Inc. inproducing Division 3's product are currentlypurchased from outside suppliers at a cost of $5 perunit. However, the same materials are available fromDivision 6.Division 6 has unused capacity and can produce thematerials needed by Division 3 at a variable cost of $3per unit. A transfer price of $3.20 per unit isestablished, and 40,000 unitsand 40,000 units of material aretransferred, with no reduction in Division 6's currentsales.How much would Division 3's income from operationsincrease?

Answered: Image /qna-images/answer/3383fcf7-1e5b-43c3-ac40-e6c4bebb679c.jpg

Answered: Materials used by Square Yard Products…

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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Porter Division is part of the Hurry Group. It produces a machine spare part at a cost of $20 which is then transferred to Hermy Division within the group which has additional costs of $10. Hermy Division sells externally at $32. The spare part is also produced in other divisions within the Hurry Group and a limited quantity can be purchased from outside the group. Hurry Group has a policy of transfer price at cost plus 20%. Question: Analyse the result above and problem arise on the current transfer pricing method used by the company.
Wexpro, Incorporated, produces several products from processing 1 ton of clypton, a rare mineral. Material and processing costs total $71,000 per ton, one-fourth of which is allocated to product X15. Six thousand five hundred units of product X15 are produced from each ton of clypton. The units can either be sold at the split-off point for $17 each, or processed further at a total cost of $8,800 and then sold for $22 each. Required: 1. What is the financial advantage (disadvantage) of further processing product X15? 2. Should product X15 be processed further or sold at the split-off point? 1. 2. Product X15 should be
The materials used by Hibiscus Company Division A are currently purchased from outside supplier at $53 per unit. Division B is able to supply Division A with 12,400 units at a variable cost of $47 per unit. The two divisions have recently negotiated a transfer price of $48 per unit for the 12,400 units. (a) By how much will each division's income increase as a result of this transfer? Enter an increase as a positive number and a decrease as a negative number. Division A $fill in the blank 1 Division B $fill in the blank 2 (b) What is the total increase in income for Hibiscus Company? $fill in the blank 3
Futura Company purchases the 66,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.50 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $11.40 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 4.00 3.50 1.90 1.10 0.50 0.40 $11.40 Total $ 125,400 $ 72,600 $ 26,400 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $125,400) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $88,000 per period.…
Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $14.00 per unit. The unit cost for the business to make the part is $22.00, including fixed costs, and $11.00, excluding fixed costs. If 39,879 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it? a.$558,306 cost decrease b.$119,637 cost increase c.$319,032 cost increase d.$119,637 cost decrease
Barrington Box Enterprises has two divisions, large and small, that share the common costs of the company's communications network. The annual common costs are $4,800,000. You have been provided with the following information for the upcoming year: Large Small Calls 150,000 90,000 The cost accountant determined $2,760,000 of the communication network's costs were fixed and should be allocated based on the number of calls. The remaining costs should be allocated based on the time on the network. What is the total communication network costs allocated to the Large Box Division, assuming the company uses dual-rates to allocate common costs? Multiple Choice $2,760,000 $2,259,000 $2,541,000 Time on Network (hours) 160,000 240,000 $1,640,000
Grey Inc. has been purchasing a component, Z for $85 a unit. The company is currently operating at 75% of full capacity, and no significant increase in production is anticipated in the near future. The cost of manufacturing a unit of Z, determined by absorption costing method, is estimated as follows: Direct materials $30 Direct labor 15 Variable factory overhead 26 Fixed factory overhead 10 Total $81 Prepare a differential analysis report, dated March 12 of the current year, on the decision to make or buy Part Z. Grey Inc. Proposal to Manufacture Part Z March 12, 20XX Purchase price of Part Z Differential cost to manufacture Z: Direct materials X Direct labor X Variable factory overhead X Cost savings from manufacturing Part Z
Meman
Dinesh
Futura Company purchases the 71,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $13.00 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $14.20 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit Total $ 7.00 3.00 B 1.90 $ 134,900 1.40 $ 99,400 0.50 0.40 $ 28,400 $14.20 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $134,900) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $82,000 per period.…

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