Mogi Corp. manufactures one primary product, which is processed through two divisions (P and R). Costs for each division are: P R Variable cost per gallon $3 $15 Fixed cost per gallon* 2 12 * Based on production of 25,000 and 40,000 gallons for P and R respectively. P Division produces 25,000 gallons per month. R Division uses 40,000 gallons per month; of that, 25,000 gallons are purchased internally and 15,000 are purchased externally at $10 per gallon. After processing through R Division, a gallon of final product can be sold for $55. A. What is Mogi Corp.’s operating profit if all 40,000 gallon of final product can be sold for $55 per gallon? $Answer
Mogi Corp. manufactures one primary product, which is processed through two divisions (P and R). Costs for each division are: P R Variable cost per gallon $3 $15 Fixed cost per gallon* 2 12 * Based on production of 25,000 and 40,000 gallons for P and R respectively. P Division produces 25,000 gallons per month. R Division uses 40,000 gallons per month; of that, 25,000 gallons are purchased internally and 15,000 are purchased externally at $10 per gallon. After processing through R Division, a gallon of final product can be sold for $55. A. What is Mogi Corp.’s operating profit if all 40,000 gallon of final product can be sold for $55 per gallon? $Answer
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transfer pricing
Mogi Corp. manufactures one primary product, which is processed through two divisions (P and R). Costs for each division are:
| P | R | |
|---|---|---|
| Variable cost per gallon | $3 | $15 |
| Fixed cost per gallon* | 2 | 12 |
* Based on production of 25,000 and 40,000 gallons for P and R respectively.
P Division produces 25,000 gallons per month. R Division uses 40,000 gallons per month; of that, 25,000 gallons are purchased internally and 15,000 are purchased externally at $10 per gallon. After processing through R Division, a gallon of final product can be sold for $55.
A. What is Mogi Corp.’s operating profit if all 40,000 gallon of final product can be sold for $55 per gallon? $Answer
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