Production Inc. has two divisions: Machining and Assembling. The Machining Division is currently operating at maximum capacity by producing one of the company's existing products at $81 of variable cost per unit and selling it to outside buyers at $111 per unit. The Assembling Division requests from the Machining Division to machine 104 units of a new product that takes half of the time to produce than the existing product sold to outside markets. The variable cost for producing this new product is $66. The Assembling Division can purchase the requested 104 units from an outside vendor for a total of $8754. What would be the maximum transfer price per unit? Instructions: Only round your final answer. Do NOT round before. Round your final answer to two decimal places. Random example 1: round 5.452 to 5.45. Random example 2: round 7.568 to 7.57.

Production Inc. has two divisions: Machining and Assembling. The Machining Division is currently operating at maximum capacity by producing one of the company's existing products at $81 of variable cost per unit and selling it to outside buyers at $111 per unit. The Assembling Division requests from the Machining Division to machine 104 units of a new product that takes half of the time to produce than the existing product sold to outside markets. The variable cost for producing this new product is $66. The Assembling Division can purchase the requested 104 units from an outside vendor for a total of $8754. What would be the maximum transfer price per unit? Instructions: Only round your final answer. Do NOT round before. Round your final answer to two decimal places. Random example 1: round 5.452 to 5.45. Random example 2: round 7.568 to 7.57.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 14E: Vargas, Inc., produces industrial machinery. Vargas has a machining department and a group of direct...

See similar textbooks

Similar questions

Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins of 300 and 600, respectively. Assume initially that Patz can sell all that is produced of either component. Part A requires two hours of assembly, and B requires five hours of assembly. The firm has 300 assembly hours per week. Required: 1. Express the objective of maximizing the total contribution margin subject to the assembly-hour constraint. 2. Identify the optimal amount that should be produced of each machine part and the total contribution margin associated with this mix. 3. What if market conditions are such that Patz can sell at most 75 units of Part A and 60 units of Part B? Express the objective function with its associated constraints for this case and identify the optimal mix and its associated total contribution margin.
Oakes Inc. manufactured 40,000 gallons of Mononate and 60,000 gallons of Beracyl in a joint production process, incurring 250,000 of joint costs. Oakes allocates joint costs based on the physical volume of each product produced. Mononate and Beracyl can each be sold at the split-off point in a semifinished state or, alternatively, processed further. Additional data about the two products are as follows: An assistant in the companys cost accounting department was overheard saying ...that when both joint and separable costs are considered, the firm has no business processing either product beyond the split-off point. The extra revenue is simply not worth the effort. Which of the following strategies should be recommended for Oakes?
Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each agent is paid 28,000 per year and is able to process 4,000 purchase orders. Last year, 17,800 purchase orders were processed by the five agents. Required: 1. Calculate the activity rate per purchase order. 2. Calculate, in terms of purchase orders, the: a. total activity availability b. unused capacity 3. Calculate the dollar cost of: a. total activity availability b. unused capacity 4. Express total activity availability in terms of activity capacity used and unused capacity. 5. What if one of the purchasing agents agreed to work half time for 14,000? How many purchase orders could be processed by four and a half purchasing agents? What would unused capacity be in purchase orders?
Vollmer Manufacturing makes three components for sale to refrigeration companies. The components are processed on two machines: a shaper and a grinder. The times (in minutes) required on each machine are as follows: The shaper is available for 120 hours, and the grinder for 110 hours. No more than 200 units of component 3 can be sold, but up to 1,000 units of each of the other components can be sold. In fact, the company already has orders for 600 units of component 1 that must be satisfied. The profit contributions for components 1, 2, and 3 are 8, 6, and 9, respectively. a. Formulate and solve for the recommended production quantities. b. What are the objective coefficient ranges for the three components? Interpret these ranges for company management. c. What are the right-hand-side ranges? Interpret these ranges for company management. d. If more time could be made available on the grinder, how much would it be worth? e. If more units of component 3 can be sold by reducing the sales price by 4, should the company reduce the price?
Box Springs, Inc., makes two sizes of box springs: twin and double. The direct material for the twin is $25 per unit and $40 s used in direct labor, while the direct material for the double is $40 per unit, and the labor cost is $50 per unit. Box Springs estimates it will make 5,000 twins and 9,000 doubles in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?
Carltons Kitchens makes two types of pasta makers: Strands and Shapes. The company expects to manufacture 70,000 units of Strands, which has a per-unit direct material cost of $10 and a per-unit direct labor cost of $60. It also expects to manufacture 30.000 units of Shapes, which has a per-unit material cost of $15 and a per-unit direct labor cost of $40. It is estimated that Strands will use 140,000 machine hours and Shapes will require 60,000 machine hours. Historically, the company has used the traditional allocation method and applied overhead at a rate of $21 per machine hour. It was determined that there were three cost pools, and the overhead for each cost pool is shown: The cost driver for each cost pool and its expected activity is shown: A. What is the per-unit cost for each product under the traditional allocation method? B. What is the per-unit cost for each product under ABC costing?
Vargas, Inc., produces industrial machinery. Vargas has a machining department and a group of direct laborers called machinists. Each machinist is paid 25,000 and can machine up to 500 units per year. Vargas also hires supervisors to develop machine specification plans and to oversee production within the machining department. Given the planning and supervisory work, a supervisor can oversee three machinists, at most. Vargass accounting and production history reveal the following relationships between units produced and the costs of direct labor and supervision (measured on an annual basis): Required: 1. Prepare two graphs: one that illustrates the relationship between direct labor cost and units produced, and one that illustrates the relationship between the cost of supervision and units produced. Let cost be the vertical axis and units produced the horizontal axis. 2. How would you classify each cost? Why? 3. Suppose that the normal range of activity is between 2,400 and 2,450 units and that the exact number of machinists is currently hired to support this level of activity. Further suppose that production for the next year is expected to increase by an additional 400 units. How much will the cost of direct labor increase (and how will this increase be realized)? Cost of supervision?
Timekeeper Corporation has two divisions, Distribution and Manufacturing. The company's primary product is highminus−end watches. Each division's costs are provided below: Manufacturing: Variable costs per unit $1.95 Fixed costs per unit $8.17 Distribution: Variable costs per unit $1.10 Fixed costs per unit $1.00 The Distribution Division has been operating at a capacity of 4,007,000 units a week and usually purchases 2,003,500 units from the Manufacturing Division and 2,003,500 units from other suppliers at $16.00 per unit. What is the transfer price per watch from the Manufacturing Division to the Distribution Division, assuming the method used to place a value on each watch is 160% of variable costs? (Round the answer to the nearest cent.)
Timekeeper Corporation has two divisions, Distribution and Manufacturing. The company's primary product is high−end watches. Each division's costs are provided below: Manufacturing: Variable costs per unit $3.45 Fixed costs per unit $9.85 Distribution: Variable costs per unit $0.70 Fixed costs per unit $0.50 The Distribution Division has been operating at a capacity of 4,003,000units a week and usually purchases 2,001,500 units from the Manufacturing Division and 2,001,500 units from other suppliers at $15.50 per unit. What is the transfer price per watch from the Manufacturing Division to the Distribution Division, assuming the method used to place a value on each transfer is 125% of full costs? A. $20.15 B. $16.63 C. $15.50 D. $13.30
Timekeeper Corporation has two divisions, Distribution and Manufacturing. The company's primary product is high−end watches. Each division's costs are provided below: Manufacturing:Variable costs per unit $1.81 Fixed costs per unit $9.52 Distribution: Variable costs per unit $1.20 Fixed costs per unit $1.00 The Distribution Division has been operating at a capacity of 4,003,000 units a week and usually purchases 2,001,500 units from the Manufacturing Division and 2,001,500 units from other suppliers at $13.50 per unit. Assume 100,000 units are transferred from the Manufacturing Division to the Distribution Division for a transfer price of $10.00 per unit. The Distribution Division sells the 100,000 units at a price of $17 each to customers. What is the operating income of both divisions together? A. $566,500 B. $952,000 C. $347,000 D. $401,000
Cascade Containers is organized into two divisions-Manufacturing and Distribution. Manufacturing produces a product that can be sold immediately or transferred to Distribution for further processing and then sold. Distribution only buys from Manufacturing for quality control reasons. Manufacturing currently sells 2,400 units annually at a price of $600 per unit to outside customers. It sells an additional 1,200 units to Distribution. The unit variable cost in Manufacturing is $300 and annual fixed costs are $300,000. Manufacturing is located in a country with a 20 percent tax rate. Distribution can sell units that have had further processing for $1,200 each. In addition to what it pays Manufacturing, the variable costs in Distribution are $150 per unit. Annual fixed costs in Distribution are $360,000. Distribution is located in a country with a 10 percent tax rate. Required: a. Suppose Manufacturing would have excess capacity even with the demand from Distribution. Ignoring tax…
Timekeeper Corporation has two divisions, Distribution and Manufacturing. The company's primary product is high−end watches. Each division's costs are provided below: Manufacturing: Variable costs per unit $1.95 Fixed costs per unit $8.17 Distribution: Variable costs per unit $1.10 Fixed costs per unit $1.00 The Distribution Division has been operating at a capacity of 4,007,000 units a week and usually purchases 2,003,500 units from the Manufacturing Division and 2,003,500 units from other suppliers at $16.00 per unit. What is the transfer price per watch from the Manufacturing Division to the Distribution Division, assuming the method used to place a value on each watch is 160% of variable costs? (Round the answer to the nearest cent.) A. $14.05 B. $3.89 C. $1.95 D. $3.12