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 capacity10,000chipsExternal sales6,000chipsInternal sales0chipsPresently, 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. Two possible transfer prices (for 4,000 units) are under consideration by the two divisions: $35 and $40. Corporate profits would be ____ if $35 is selected as the transfer price rather than $40.Select one:a. $20,000 largerb. $20,000 smallerc. $40,000 largerd. the same

In the above question, it is mentioned that Computer division is not purchasing chip from Computer…

Answered: Neely Systems Corporation manufactures…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 6E: Varney Corporation, a manufacturer of electronics and communications systems, allocates Computing...

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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. Two possible transfer prices (for 4,000 units) are under consideration by the two divisions: $35 and $40. Corporate profits would be ____ if $35 is selected as the transfer price rather than $40.

Select one:

a. $20,000 larger

b. $20,000 smaller

c. $40,000 larger

d. the same

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