on your answer in the previous requirement, provide and justify a proper transfer price. (130 words)
Q: What is the Economic Value Added (EVA) method? Provide a definition, state a formula, and define all…
A: Economic Value Added (EVA): EVA also called economic profit is a measure of the financial…
Q: What is a transfer price? What are the three main approaches to setting transfer prices?
A: Transfer pricing: Transfer pricing refers to the setting of prices for goods and services that are…
Q: In the Gold Blue Company, Division A has a product that can be sold either to outside customers or…
A: Note: As per general rule, in the case of sufficient capacity available, the minimum transfer price…
Q: Define transfer pricing and elaborate on FOUR (4) of its purposes. B. In deciding a transfer…
A: There are some transactions that take place within different divisions of an enterprise. Sometimes,…
Q: A. Define transfer pricing and elaborate on FOUR (4) of its purposes.
A: Transfer pricing is the price which is to be calculated if there is any transaction between related…
Q: can you now calculate the gross profit ?
A: Gross profit can be defined as the net sales revenue earned by business over a particular period of…
Q: Can we compute the IRR for each option without knowing the revenue figure? Why?
A: The internal rate of return (IRR) is a capital budgeting metric used to gauge the benefit of…
Q: The X Division of NUBD Co. uses 5,000 motor batteries per month in its production of cars. It…
A: Note: As per general rule, in the case of sufficient capacity available, the minimum transfer price…
Q: Define Purchase return.
A: Financial accounting is the process of recording, summarizing, and reporting all the transactions in…
Q: Explain Pass-Through Rates, Yields, and Servicing Fee?
A: Pass-through rateA rate of interest being paid to the investors on the securitized asset after…
Q: Which of the following transfer price approaches is used when the transfer price is set at the…
A: Transfer Price : Price at which related parties transact with each other is known as transfer…
Q: The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division.…
A: Transfer pricing methodology is used for setting prices at which products can be transferred from…
Q: Payback Period Year Year 1 Year 2 Year 3 Year 4 Year 5 Initial Ivestment Investment 1,460,605.14…
A: Payback period is a financial metric that calculates the amount of time it takes for an investment…
Q: Explain the criteria used for judging a transfer pricing system (ii) Explain the term “…
A: (i) The criteria used for judging a transfer pricing system include the following: 1.…
Q: Required information [The following information applies to the questions displayed below.] In each…
A: The acceptable transfer price between the transferor and transferee division is the one where the…
Q: Create a chart reflecting the convention payback period?
A: The chart is presented below:
Q: What difficulties do you see in using a full-cost transfer-pricing system in the future?
A: Transfer Pricing: This refers to a process of pricing in which one sub-unit of an organization…
Q: What is Transfer Pricing? What are the approaches in determining transfer prices? In your own…
A: Explanation of transfer pricing and approaches determining transfer pricing are as follows.
Q: What is meant by Transfer price and why transfer prices are needed? 2- Distinguish between Traceable…
A: Meaning of Transfer Price, Traceable and Common cost is given below,
Q: The XYZ Multinational Corporation has manufacturing facilities in country A and an assembly plant in…
A: Transfer price refers to the price charged by one department of a company from another department…
Q: gross margin for FPD if it accepted the transfer price
A: Variable costs P400,000 Fixed costs P100,000 Total cost (A) P500,000 Total number of units…
Q: The Chair Division currently purchases the cushions for S26 from an outside vendor. The Cushion…
A: Transfer price is the price at which one division of a company transfers goods/services to another…
Q: Outline the rules for identifying the optimal transfer price.
A: Transfer pricing:- Transfer pricing is considered as the value that is attached to those goods and…
Q: Should transfers be made to division B if there is no unused capacity in division A? Is the market…
A: Transfer pricing: This process refers to the process of pricing in which on sub-unit of an…
Q: Required information [The following information applies to the questions displayed below.] In each…
A: Transfer price is the price used for purchasing and selling goods or services within the divisions…
Q: Identify three cost-based transfer prices. What are the disadvantages of cost-based transfer prices?…
A: Transfer Pricing: It is the value at which goods and services are transferred from one unit to…
Q: What should the transfer price be and why?
A: Given that: Transfer price as proposed by Top Division = $256 Price that is charge to outside…
Q: Sunland Inc. manufactures wood poles. Sunland Inc. has two responsibility centres, harvesting and…
A: The decisions are made based on the contribution margin. The proposal that gives a higher…
![2. Based
your
in the previous
on
answer
requirement, provide and justify
a proper
transfer price. (130 words)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fef445ee8-89e0-4e2e-92cd-5e3ef3da683a%2Fd248a9a4-9a95-402e-a4f7-ab10b86f7394%2Fiqcylll_processed.jpeg&w=3840&q=75)
![Gamma Company produces cars. Two of the profit
centers, Tires center and Assembly center, were in
conflict over the price of tires. External suppliers
of tires offered Rania, the manager of the
Assembly center, the same type and quality of tire
for $200. Rania used to buy these tires internally
for $300 each.
Jamil the CEO of the company called for a
meeting with the managers of both centers in order
to solve the issue. Kamil the manager of the Tires
Centre explained that:
"The tires we produce have been a trusted brand
for over 60 years and are distributed by Gamma
Company to members all over the globe. Our tires
have long been recognized as a leading private
brand since 1954."
Tires Center: Cost
per
tire
2$
Direct materials
95
Direct labor
54
Variable overheads
25](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fef445ee8-89e0-4e2e-92cd-5e3ef3da683a%2Fd248a9a4-9a95-402e-a4f7-ab10b86f7394%2F3jzh8qp_processed.jpeg&w=3840&q=75)
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- At the beginning of the last quarter of 20x1, Youngston, Inc., a consumer products firm, hired Maria Carrillo to take over one of its divisions. The division manufactured small home appliances and was struggling to survive in a very competitive market. Maria immediately requested a projected income statement for 20x1. In response, the controller provided the following statement: After some investigation, Maria soon realized that the products being produced had a serious problem with quality. She once again requested a special study by the controllers office to supply a report on the level of quality costs. By the middle of November, Maria received the following report from the controller: Maria was surprised at the level of quality costs. They represented 30 percent of sales, which was certainly excessive. She knew that the division had to produce high-quality products to survive. The number of defective units produced needed to be reduced dramatically. Thus, Maria decided to pursue a quality-driven turnaround strategy. Revenue growth and cost reduction could both be achieved if quality could be improved. By growing revenues and decreasing costs, profitability could be increased. After meeting with the managers of production, marketing, purchasing, and human resources, Maria made the following decisions, effective immediately (end of November 20x1): a. More will be invested in employee training. Workers will be trained to detect quality problems and empowered to make improvements. Workers will be allowed a bonus of 10 percent of any cost savings produced by their suggested improvements. b. Two design engineers will be hired immediately, with expectations of hiring one or two more within a year. These engineers will be in charge of redesigning processes and products with the objective of improving quality. They will also be given the responsibility of working with selected suppliers to help improve the quality of their products and processes. Design engineers were considered a strategic necessity. c. Implement a new process: evaluation and selection of suppliers. This new process has the objective of selecting a group of suppliers that are willing and capable of providing nondefective components. d. Effective immediately, the division will begin inspecting purchased components. According to production, many of the quality problems are caused by defective components purchased from outside suppliers. Incoming inspection is viewed as a transitional activity. Once the division has developed a group of suppliers capable of delivering nondefective components, this activity will be eliminated. e. Within three years, the goal is to produce products with a defect rate less than 0.10 percent. By reducing the defect rate to this level, marketing is confident that market share will increase by at least 50 percent (as a consequence of increased customer satisfaction). Products with better quality will help establish an improved product image and reputation, allowing the division to capture new customers and increase market share. f. Accounting will be given the charge to install a quality information reporting system. Daily reports on operational quality data (e.g., percentage of defective units), weekly updates of trend graphs (posted throughout the division), and quarterly cost reports are the types of information required. g. To help direct the improvements in quality activities, kaizen costing is to be implemented. For example, for the year 20x1, a kaizen standard of 6 percent of the selling price per unit was set for rework costs, a 25 percent reduction from the current actual cost. To ensure that the quality improvements were directed and translated into concrete financial outcomes, Maria also began to implement a Balanced Scorecard for the division. By the end of 20x2, progress was being made. Sales had increased to 26,000,000, and the kaizen improvements were meeting or beating expectations. For example, rework costs had dropped to 1,500,000. At the end of 20x3, two years after the turnaround quality strategy was implemented, Maria received the following quality cost report: Maria also received an income statement for 20x3: Maria was pleased with the outcomes. Revenues had grown, and costs had been reduced by at least as much as she had projected for the two-year period. Growth next year should be even greater as she was beginning to observe a favorable effect from the higher-quality products. Also, further quality cost reductions should materialize as incoming inspections were showing much higher-quality purchased components. Required: 1. Identify the strategic objectives, classified by the Balanced Scorecard perspective. Next, suggest measures for each objective. 2. Using the results from Requirement 1, describe Marias strategy using a series of if-then statements. Next, prepare a strategy map. 3. Explain how you would evaluate the success of the quality-driven turnaround strategy. What additional information would you like to have for this evaluation? 4. Explain why Maria felt that the Balanced Scorecard would increase the likelihood that the turnaround strategy would actually produce good financial outcomes. 5. Advise Maria on how to encourage her employees to align their actions and behavior with the turnaround strategy.Bienestar, Inc., has two plants that manufacture a line of wheelchairs. One is located in Kansas City, and the other in Tulsa. Each plant is set up as a profit center. During the past year, both plants sold their tilt wheelchair model for 1,620. Sales volume averages 20,000 units per year in each plant. Recently, the Kansas City plant reduced the price of the tilt model to 1,440. Discussion with the Kansas City manager revealed that the price reduction was possible because the plant had reduced its manufacturing and selling costs by reducing what was called non-value-added costs. The Kansas City manufacturing and selling costs for the tilt model were 1,260 per unit. The Kansas City manager offered to loan the Tulsa plant his cost accounting manager to help it achieve similar results. The Tulsa plant manager readily agreed, knowing that his plant must keep pacenot only with the Kansas City plant but also with competitors. A local competitor had also reduced its price on a similar model, and Tulsas marketing manager had indicated that the price must be matched or sales would drop dramatically. In fact, the marketing manager suggested that if the price were dropped to 1,404 by the end of the year, the plant could expand its share of the market by 20 percent. The plant manager agreed but insisted that the current profit per unit must be maintained. He also wants to know if the plant can at least match the 1,260 per-unit cost of the Kansas City plant and if the plant can achieve the cost reduction using the approach of the Kansas City plant. The plant controller and the Kansas City cost accounting manager have assembled the following data for the most recent year. The actual cost of inputs, their value-added (ideal) quantity levels, and the actual quantity levels are provided (for production of 20,000 units). Assume there is no difference between actual prices of activity units and standard prices. Required: 1. Calculate the target cost for expanding the Tulsa plants market share by 20 percent, assuming that the per-unit profitability is maintained as requested by the plant manager. 2. Calculate the non-value-added cost per unit. Assuming that non-value-added costs can be reduced to zero, can the Tulsa plant match the Kansas City per-unit cost? Can the target cost for expanding market share be achieved? What actions would you take if you were the plant manager? 3. Describe the role that benchmarking played in the effort of the Tulsa plant to protect and improve its competitive position.Arrow is a chain of used car dealers with showrooms in Lincoln, Derby, and Sheffield and a separate Head Office. The management accountant is reviewing the profitability of each showroom. The rent and staff costs incurred by each showroom can be saved in the event of closure. Marketing costs are allocated to each showroom, but would not be saved, if any shop were to close. Head office cost is charged at a rate of 7% of sales. The data regarding costs and sales revenues for each showroom are presented below. What is the contribution margin for each showroom, as ordered in the table above? 1. 134 18 -62 2. 229 107 34 3. 250 135 46 4. 179 40 -44
- Becky Knauer recently resigned from her position as controller for Shamalay Automotive, a small, struggling foreign car dealer in Upper Saddle River, New Jersey. Becky has just started a new job as controller for Mueller Imports, a much larger dealer for the same car manufacturer. Demand for this particular make of car is exploding, and the manufacturer cannot produce enough to satisfy demand. The manufacturer’s regional sales managers are each given a certain number of cars. Each sales manager then decides how to divide the cars among the independently owned dealerships in the region. Because of high demand for these cars, dealerships all want to receive as many cars as they can from the regional sales manager. Becky’s former employer, Shamalay Automotive, receives only about 25 cars each month. Consequently, Shamalay is not very profitable. Becky is surprised to learn that her new employer, Mueller Imports, receives more than 200 cars each month. Becky soon gets another surprise.…Tool Industries manufactures large workbenches for industrial use. Sam Hartnet, the Vice President for marketing at Tool Industries, concluded from market analysis that sales were dwindling for Tool's workbenches due to aggressive pricing by competitors. Tool's workbench sells for $1,440 whereas the competition's comparable workbench sells for $1,300. Sam determined that a price drop to $1,300 would be necessary to protect its market share and maintain an annual sales level of 13,600 workbenches. Cost data based on sales of 13,600 workbenches: Budgeted Quantity Actual Quantity Actual Cost Direct materials (pounds) 178,000 171,000 $ 3,453,000 Direct labor (hours) 74,000 73,000 826,500 Machine setups (number of setups) 1,200 1,000 253,000 Mechanical assembly (machine hours) 29,400 282,750 3,756,000 The current cost per unit is (rounded to the nearest whole dollar): Multiple Choice $560. $495. $437. $609. $417.Tool Industries manufactures large workbenches for industrial use. Sam Hartnet, the Vice President for marketing at Tool Industries, concluded from market analysis that sales were dwindling for Tool's workbenches due to aggressive pricing by competitors. Tool's workbench sells for $1,140 whereas the competition's comparable workbench sells for $1,060. Sam determined that a price drop to $1,060 would be necessary to protect its market share and maintain an annual sales level of 13,000 workbenches.Cost data based on sales of 13,000 workbenches: Budgeted Quantity Actual Quantity Actual Cost Direct materials (pounds) 175,000 168,000 $ 3,450,000 Direct labor (hours) 72,800 71,500 825,000 Machine setups (number of setups) 900 880 250,000 Mechanical assembly (machine hours) 273,000 281,250 3,750,000 If the profit per unit is maintained, the target cost per unit is (rounded to the nearest whole dollar): Multiple Choice $489. $557. $516. $424.…
- Fusion Metals Company is considering the elimination of its Packaging Department. Management has received an offer from an outside firm to supply all Fusion’s packaging needs. To help her in making the decision, Fusion’s president has asked the controller for an analysis of the cost of running Fusion’s Packaging Department. Included in that analysis is $9,100 of rent, which represents the Packaging Department’s allocation of the rent on Fusion’s factory building. If the Packaging Department is eliminated,the space it used will be converted to storage space. Currently Fusion rents storage space in a nearby warehouse for $11,000 per year. The warehouse rental would no longer be necessary if the Packaging Department were eliminated. Required:1. Discuss each of the figures given in the exercise with regard to its relevance in the departmentclosing decision.2. What type of cost is the $11,000 warehouse rental, from the viewpoint of the costs of the Packaging Department?Quality Industries manufactures large workbenches for industrial use. Yewell Hartnet, the Vice President for marketing at Quality Industries, concluded from market analysis that sales were dwindling for Quality's workbenches due to aggressive pricing by competitors. Quality's workbench sells for $1,690 whereas the competition's comparable workbench sells for $1,500. Yewell determined that a price drop to $1,500 would be necessary to protect its market share and maintain an annual sales level of 14,100 workbenches. Cost data based on sales of 14,100 workbenches: Budgeted Quantity Actual Quantity Actual Cost Direct materials (pounds) 180,500 173,500 $ 3,455,500 Direct labor (hours) 75,000 74,250 827,750 Machine setups (no. of setups) 1,450 1,100 255,500 Mechanical assembly (machine hours) 31,150 284,000 3,761,000 If the profit per unit is maintained, the target cost per unit is (rounded to the nearest whole dollar):A local coffee shop has two major product lines—drinks and pastries. If the manager allocates common costs on any objective basis discussed in this chapter, the drinks are profitable, but the pastries are not. The manager is concerned that the supervisor at corporate headquarters will drop the pastries. The manager is concerned because a relative, who is struggling to make a go of a new business, supplies pastries to the coffee shop. The manager, therefore, decides to allocate all common costs to the drinks because “Drinks can afford to absorb these costs until we get the pastries line on its feet.” After assigning all common costs to drinks, both the drinks and pastries product lines appear to be marginally profitable. Consequently, corporate headquarters decides to continue the pastries line. What can we do to boost pastry sales?
- A local coffee shop has two major product lines—drinks and pastries. If the manager allocates common costs on any objective basis discussed in this chapter, the drinks are profitable, but the pastries are not. The manager is concerned that the supervisor at corporate headquarters will drop the pastries. The manager is concerned because a relative, who is struggling to make a go of a new business, supplies pastries to the coffee shop. The manager, therefore, decides to allocate all common costs to the drinks because “Drinks can afford to absorb these costs until we get the pastries line on its feet.” After assigning all common costs to drinks, both the drinks and pastries product lines appear to be marginally profitable. Consequently, corporate headquarters decides to continue the pastries line. Required How would you recommend the manager allocate the common costs between drinks and pastries? You are the assistant manager and have been working with the manager on the allocation…Bradley Nowell works as a purchaser at Louie Dog Industries. He is in charge of purchasing dog beds from manufacturers. Bradley's mother, seeing an opportunity, starts a dog bed manufacturing company and quickly receives almost all of Louie Dog's orders. In order to fill the orders, Bradley's mother buys low-quality beds from another dog bed supplier and sells those to Louie Dog for a substantial markup. In fact, the price charged to Louie Dog is twice what other manufactures would charge the company. What type of scheme is this? Pay-and-return Non-accomplice vendor Pass-through Inventory-markupThe Monroe Forging Company sells a corrugated steel product to the Standard Manufacturing Company and is in competition on such sales with other suppliers of the Standard Manufacturing Co. The vice president of sales of Monroe Forging Co. believes that by reducing the price of the product, a 40% increase in the volume of units sold to the Standard Manufacturing Co. could be secured. As the manager of the cost and analysis department, you have been asked to analyze the proposal of the vice president and submit your recommendations as to whether it is financially beneficial to the Monroe Forging Co. You are specifically requested to determine the following: (a) Net profit or loss based on the pricing proposal. (b) Unit sales volume under the proposed price that is required to make the same $40,000 profit that is now earned at the current price and unit sales volume. Use the following data in your analysis:
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