Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $447 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $371 per unit. Assume that a transfer price of $425 has been established and that 26,500 units of materials are transferred, with no reduction in the Components Division's current sales. a. How much would Ziegler Inc.'s total operating income increase? b. How much would the Instrument Division's operating income increase? c. How much would the Components Division's operating income increase? d. Any transfer price will cause the total income of the company to , as long as the supplier division capacity is toward making materials for products that are ultimately sold to the outside.

Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $447 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $371 per unit. Assume that a transfer price of $425 has been established and that 26,500 units of materials are transferred, with no reduction in the Components Division's current sales. a. How much would Ziegler Inc.'s total operating income increase? b. How much would the Instrument Division's operating income increase? c. How much would the Components Division's operating income increase? d. Any transfer price will cause the total income of the company to , as long as the supplier division capacity is toward making materials for products that are ultimately sold to the outside.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

The materaial used by the Multinomah Division of Isbister Company are currently purchased from outside supplier at $90 per unit. The same material are produced by the Pembroke Division. The Pembroke Divisin can produced the materails needed by the Multinomah Division at a variable cost of $75 per unit. The division currently producing 120,000 units and has capacity of 150,000 units. The two division have recently negotiated a transfer price of $82 per unit for 15,000 units. By how uch will each division's income increase as a resut of the transfer?
The Heating Division of Swifty International produces a heating element that it sells to its customers for $38 per unit. Its unit variable cost is $23, and its unit fixed cost is $8. Top management of Swifty International would like the Heating Division to transfer 15,400 heating units to another division within the company at a price of $31. The Heating Division is operating at full capacity. What is the minimum transfer price that the Heating Division should accept? Minimum transfer price 23
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
A company makes 36,000 motors to be used in the production of its blender. The average cost per motor at this level of activity is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead An outside supplier recently began producing a comparable motor that could be used in the blender. The price offered to the company for this motor is $23.95. There would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. The annual financial advantage (disadvantage) for the company as a result of making the motors rather than buying them from the outside supplier would be: Multiple Choice O O O ($68,400) $214,200 $9.50 $ 8.50 $ 3.45 $ 4.40 90,000 $158,400
Division A has the capacity to produce 120,000 units. The normal selling price of each unit is P80. The variable cost incurred for each unit is P42. Total direct fixed cost for the relevant range is P1,150,000. Division B can use the products of Division A as an input in its manufacturing process but is currently acquiring the said products from an outside supplier. The price per unit is P75. Total annual demand is 30,000 units. 1. Assuming sufficient capacity, what is the minimum acceptable transfer price to Division A? 2. Assuming only 22,500 excess capacity, what is the minimum acceptable transfer price to Division A? 3. Assuming no excess capacity, what is the minimum acceptable transfer price to Division A? 4. What is the maximum acceptable transfer price to Division B?
The materials used by the North Division of Horton Company are currently purchased from outside suppliers at $29 per unit. These same materials are produced by Horton’s South Division. The South Division can produce the materials needed by the North Division at a variable cost of $14 per unit. The division is currently producing 126,000 units and has capacity of 180,000 units. The two divisions have recently negotiated a transfer price of $20 per unit for 54,000 units. By how much will each division's income increase as a result of this transfer? South Division $ North Division $
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
The process-control division expects to sell 1,250 process-control units this year. From the viewpoint of Sierra Inc. as a whole, should 1,250 Xcel-chips be transferred to the process-control division to replace circuit boards? Show your computations.
Division A has the capacity to produce 120,000 units. The normal selling price of each unit is P80. The variable cost incurred for each unit is P42. Total direct fixed cost for the relevant range is P1,150,000. Division B can use the products of Division A as an input in its manufacturing process but is currently acquiring the said products from an outside supplier. The price per unit is P75. Total annual demand is 30,000 units. Assuming sufficient capacity, what is the minimum acceptable transfer price to Division A? Assuming only 22,500 excess capacity, what is the minimum acceptable transfer price to Division A? Assuming only 22,500 excess capacity and that Division A can avoid variable selling cost per unit of P4 but will incur a one-time fixed cost of P30,000 for the order, what is the minimum acceptable transfer price to Division A? Assuming no excess capacity, what is the minimum acceptable transfer price to Division A? What is the maximum acceptable transfer…
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
Southwest Division offers its product to outside markets for $30. It incurs variable costs of $11 per unit and fixed costs of $37,50040,000 per month based on monthly production of 4,000 units. Northeast Division can acquire the product from an alternate supplier for $31 per unit or from Southwest Division for a transfer price of $30 plus $2 per unit in transportation costs. a. What are the costs and benefits of the alternatives available to Southwest Division and Northeast Division with respect to the transfer of Southwest Division's product? b. How would you answer change if Southwest Division had idle capacity sufficient to cover all of Northeast Division's needs?