Robert Products Incorporated consists of three decentralized divisions: Bayside Division, Cole Division, and DiamondDivision. The president of Robert Products has given the managers of the three divisions authority to decide whether tosell outside the company or among themselves at an internal price determined by the division managers. Marketconditions are such that sales made internally or externally will not affect market or transfer prices. Intermediate marketswill always be available for Bayside, Cole, and Diamond to purchase their manufacturing needs or sell their product.The manager of the Cole Division is currently considering the two alternative orders presented below:• The Diamond Division is in need of 3,000 units of a motor that can be supplied by the Cole Division. To manufacturethese motors, Cole would purchase components from the Bayside Division at a price of $600 per unit; Bayside'svariable cost for these components is $300 per unit. Cole Division will further process these components at a variablecost of $500 per unit.If the Diamond Division cannot obtain the motors from Cole Division, it will purchase the motors from LondonCompany which has offered to supply them to Diamond at a price of $1,500 per unit. London Company would alsopurchase 3,000 components from Bayside Division at a price of $400 for each of these motors; Bayside's variablecost for these components is $200 per unit.• The Wales Company wants to place an order with the Cole Division for 3,500 similar motors at a price of $1,250 perunit. Cole would again purchase components from the Bayside Division at a price of $500 per unit; Bayside's variablecost for these components is $250 per unit. Cole Division will further process these components at a variable cost of$400 per unit.The Cole Division's plant capacity is limited, and the division can accept either the Wales contract or the Diamond order,but not both. The president of Robert Products and the manager of the Cole Division agree that it would not be beneficialin the short or long run to increase capacity.Required:1. Determine whether the Cole Division should sell motors to the Diamond Division at the prevailing market price, or accept the WalesCompany contract. (Enter your answers in thousands.) X Answer is complete but not entirely correct.From the Cole Division Point of View:Contribution margin from Wales contractContribution margin from Diamond SaleDifferenceAccept or Reject the Wales contract?From the Point of View of the Cost to the Entire Company:Cole transfers to DiamondCole sells to WalesDifferenceAccept or Reject the Wales contract?$ 1,200,000 X900,000 X$ 4,500,000Accept$ 1,225,000 X1,475,000$4,500,000 XAccept

Cost to cole division:Purchase cost of component from bayside = $600Variable cost for…

Answered: Required: 1. Determine whether the Cole…

Required: 1. Determine whether the Cole Division should sell motors to the Diamond Division at the prevailing market price, or accept the Wales Company contract. (Enter your answers in thousands.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

6. A lamp socket die-cutting company has two alternatives to purchase a new die-cutting machine, where the initial investment (in US dollars) and the projected net income stream for each alternative is shown in the following tables; the number of periods corresponds to the number of years of service life. If the company's purchasing committee considers a capital cost of 12.50% for internal financing, which machine should be purchased?
Leo Consulting enters into a contract with Highgate University to restructure Highgate’s processes for purchasing goods from suppliers. The contract states that Leo will earn a fixed fee of $66,000 and earn an additional $13,000 if Highgate achieves $130,000 of cost savings. Leo estimates a 70% chance that Highgate will achieve $130,000 of cost savings. Assuming that Leo determines the transaction price as the expected value of expected consideration, what transaction price will Leo estimate for this contract? Transaction price for the contract ?
Subject : Accounting
Required information [The following information applies to the questions displayed below.] Illinois Metallurgy Corporation has two divisions. The Fabrication Division transfers partially completed components to the Assembly Division at a predetermined transfer price. The Fabrication Division's standard variable production cost per unit is $550. The division has no excess capacity, and it could sell all of its components to outside buyers at $770 per unit in a perfectly competitive market. Required: 1. Determine a transfer price using the general rule. Transfer price
_____ 1. If Moonton Company instructed Northern Vale Division to supply Iron Hooks to Mooniyan Division, how much is the maximum transfer price that they can consider? (Round off your final answer to 3 decimal places)_____ 2. Continuing from Question No.1, how much is the minimum transfer price that they can consider? (Round off your final answer to 3 decimal places)
Solve 2, the first answer is the wrong. Find the lowest acceptable transfer price.
Marigold Corp. is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $27 and Marigold would sell it for $60. The cost to assemble the product is estimated at $13 per unit and the company believes the market would support a price of $64 on the assembled unit. What decision should Marigold make and why? Sell before assembly because the company will be better off by $9 per unit. Sell before assembly because the company will be better off by $4 per unit. Process further because the company will be better off by $18 per unit. Process further because the company will be better off by $20 per unit.
Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following: (FV of $1, PV of $1, FVA of S1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Machine À could be purchased for $27,000. It will last 10 years with annual maintenance costs of $900 per year. After 10 years the machine can be sold for $2,835. Machine 8 could be purchased for $22,500. It also will last 10 years and will require maintenance costs of $3,600 in year three, $4,500 in year six, and $5,400 in year eight. After 10 years, the machine will have no salvage value. Required: Assume an interest rate of 8% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year. Ignore income tax considerations. Calculate the present value of Machine A & Machine B. Which machine Esquire…
Solve the following
Two alternatives, code-named X and Y, are under consideration at Guyer Corporation. Costs associated with the alternatives are listed below. Materials costs Processing costs Equipment rental Occupancy costs Alternative X $45,000 $49, 400 $18, 400 $17, 600 Multiple Choice What is the financial advantage (disadvantage) of Alternative Y over Alternative X? Show Transcribed Text $(144,800) $130,400 Alternative Y $65, 300 $49, 400 $18, 400 $26, 100 $159,200 $(28,800) G
Hh.
Assume that Smart expects to produce and sell 80,000 units but has the capacity to produce 100,000 units. The manager of Globe Division, which is currently buying 30,000 units of a similar product from outside supplier for P26.50, offers to buy the units from the Smart division only if Smart will supply 30,000 units needed. 1A. What is the maximum price Globe’s manager is likely to offer for the units? 1B. What is the minimum price Smart manager is likely to accept on a sale of 30,000 units to Globe? 1C. If Globe manager offers P24.50 per unit and Smart manager accepts the offer, what will be the amount and direction of the effect on the total income of Smart division, Globe division and Mobile TeleCom? Increasing or Decreasing direction? Help answer 1A to 1C with solution pls