Neely Systems Corporation manufactures and sells various high-tech office automation products. Two divisions of Neely Systems Corporation are the Computer Chip Division and the Computer Division. The Computer Chip Division manufactures one product, a "super chip," that can be used by both the Computer Division and other external customers. The following information is available on this month's operations in the Computer Chip Division: Selling price per chip $50 Variable costs per chip $20 Fixed production costs $60,000 Fixed SG&A costs $90,000 Monthly capacity 10,000 chips External sales 6,000 chips Internal sales 0 chips Presently, the Computer Division purchases no chips from the Computer Chips Division, but instead pays $45 to an external supplier for the 4,000 chips it needs each month. Refer to Neely Systems Corporation. If a transfer between the two divisions is arranged next period at a price (on 4,000 units of super chips) of $40, total profits in the Computer Chip division will Select one: a. rise by $20,000 compared to the prior period b. drop by $20,000 compared to the prior period c. drop by $40,000 compared to the prior period d. rise by $80,000 compared to the prior period
Neely Systems Corporation manufactures and sells various high-tech office automation products. Two divisions of Neely Systems Corporation are the Computer Chip Division and the Computer Division. The Computer Chip Division manufactures one product, a "super chip," that can be used by both the Computer Division and other external customers. The following information is available on this month's operations in the Computer Chip Division: Selling price per chip $50 Variable costs per chip $20 Fixed production costs $60,000 Fixed SG&A costs $90,000 Monthly capacity 10,000 chips External sales 6,000 chips Internal sales 0 chips Presently, the Computer Division purchases no chips from the Computer Chips Division, but instead pays $45 to an external supplier for the 4,000 chips it needs each month. Refer to Neely Systems Corporation. If a transfer between the two divisions is arranged next period at a price (on 4,000 units of super chips) of $40, total profits in the Computer Chip division will Select one: a. rise by $20,000 compared to the prior period b. drop by $20,000 compared to the prior period c. drop by $40,000 compared to the prior period d. rise by $80,000 compared to the prior period
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Neely Systems Corporation manufactures and sells various high-tech office automation products. Two divisions of Neely Systems Corporation are the Computer Chip Division and the Computer Division. The Computer Chip Division manufactures one product, a "super chip," that can be used by both the Computer Division and other external customers. The following information is available on this month's operations in the Computer Chip Division:
| Selling price per chip | $50 | |
| Variable costs per chip | $20 | |
| Fixed production costs | $60,000 | |
| Fixed SG&A costs | $90,000 | |
| Monthly capacity | 10,000 | chips |
| External sales | 6,000 | chips |
| Internal sales | 0 | chips |
Presently, the Computer Division purchases no chips from the Computer Chips Division, but instead pays $45 to an external supplier for the 4,000 chips it needs each month.
Refer to Neely Systems Corporation. If a transfer between the two divisions is arranged next period at a price (on 4,000 units of super chips) of $40, total profits in the Computer Chip division willSelect one:
a. rise by $20,000 compared to the prior period
b. drop by $20,000 compared to the prior period
c. drop by $40,000 compared to the prior period
d. rise by $80,000 compared to the prior period
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