Shaw is a lumber company that also manufactures custom cabinetry. It is made up of two divisions: Lumber and Cabinetry. The Lumber Division is responsible for harvesting and preparing lumber for use; the Cabinetry Division produces custom-ordered cabinetry. The lumber produced by the Lumber Division has a variable cost of $2.20 per linear foot and full cost of $3.20. Comparable quality wood sells on the open market for $6.60 per linear foot. Required: 1. Assume you are the manager of the Cabinetry Division. Determine the maximum amount you would pay for lumber. 2. Assume you are the manager of the Lumber Division. Determine the minimum amount you would charge for the lumber if you have excess capacity. Repeat assuming you have no excess capacity. 3. Assume you are the president of Shaw. Determine a mutually beneficial transfer price assuming there is excess capacity. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Assume you are the president of Shaw. Determine a mutually beneficial transfer price assuming there is excess capacity. (Enter your answers to 2 decimal places.) Mutually Beneficial Transfer Price < Required Required 3 >

Shaw is a lumber company that also manufactures custom cabinetry. It is made up of two divisions: Lumber and Cabinetry. The Lumber Division is responsible for harvesting and preparing lumber for use; the Cabinetry Division produces custom-ordered cabinetry. The lumber produced by the Lumber Division has a variable cost of $2.20 per linear foot and full cost of $3.20. Comparable quality wood sells on the open market for $6.60 per linear foot. Required: 1. Assume you are the manager of the Cabinetry Division. Determine the maximum amount you would pay for lumber. 2. Assume you are the manager of the Lumber Division. Determine the minimum amount you would charge for the lumber if you have excess capacity. Repeat assuming you have no excess capacity. 3. Assume you are the president of Shaw. Determine a mutually beneficial transfer price assuming there is excess capacity. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Assume you are the president of Shaw. Determine a mutually beneficial transfer price assuming there is excess capacity. (Enter your answers to 2 decimal places.) Mutually Beneficial Transfer Price < Required Required 3 >

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Shaw is a lumber company that also manufactures custom cabinetry. It is made up of two divisions: Lumber and Cabinetry. The Lumber Division is responsible for harvesting and preparing lumber for use; the Cabinetry Division produces custom-ordered cabinetry. The lumber produced by the Lumber Division has a variable cost of $3.90 per linear foot and full cost of $4.90. Comparable quality wood sells on the open market for $11.70 per linear foot.Required:1. Assume you are the manager of the Cabinetry Division. Determine the maximum amount you would pay for lumber.2. Assume you are the manager of the Lumber Division. Determine the minimum amount you would charge for the lumber if you have excess capacity. Repeat assuming you have no excess capacity.3. Assume you are the president of Shaw. Determine a mutually beneficial transfer price assuming there is excess capacity.
Shaw is a lumber company that also manufactures custom cabinetry. It is made up of two divisions: Lumber and Cabinetry. The Lumber Division is responsible for harvesting and preparing lumber for use; the Cabinetry Division produces custom-ordered cabinetry. The lumber produced by the Lumber Division has a variable cost of $3.00 per linear foot and full cost of $4.00. Comparable quality wood sells on the open market for $9.00 per linear foot.Required:1. Assume you are the manager of the Cabinetry Division. Determine the maximum amount you would pay for lumber. (Enter your answers to 2 decimal places.)2. Assume you are the manager of the Lumber Division. Determine the minimum amount you would charge for the lumber if you have excess capacity. Repeat assuming you have no excess capacity. (Enter your answers to 2 decimal places.) minimum price with excess capacity minimum price without excess capacity 3. Assume you are the president of Shaw. Determine a mutually beneficial…
Assume you are the manager of the Cabinetry Division. Determine the maximum amount you would pay for lumber.
Assume you are the manager of the Lumber Division. Determine the minimum amount you would charge for the lumber if you have excess capacity. Repeat assuming you have no excess capacity.
The Spanish Watch Company has two divisions and manufactures one type of watch. The two divisions are the production Division and the Package & Delivery Division. The production Division manufactures watches and then sells them to the Package & Delivery Division, which packs the watches and sells them to retailers. The market price for the Package & Delivery Division to purchase this watch is £40. Production's cost per watch are: Direct materials 6. Direct labour Variable overhead Division fixed cost Package & Delivery's cost per watch are: Direct materials Direct labour. Variable overhead 4 Division fixed cost 16 Notes: Fixed costs shown above are per watch for 100,000 units. Required: a) Assume the transfer price for a watch is 160% of full costs of the Production Division and 100,000 watches are produced and sold to the Package & Delivery Division. What is the Production Division's operating in- come? b) If the Package & Delivery Division purchases 100,000 watches from production…
Fogerty Company makes two products-titanium Hubs and Sprockets. Data regarding the two products follow: Direct Labor-Hours per Unit Hubs Sprockets Additional information about the company follows: a. Hubs require $36 in direct materials per unit, and Sprockets require $10. b. The direct labor wage rate is $13 per hour. c. Hubs require special equipment and are more complex to manufacture than Sprockets. d. The ABC system has the following activity cost pools: 0.80 0.40 Annual Production 20,000 units 50,000 units Activity Cost Pool (Activity Measure) Machine setups (number of setups) Special processing (machine-hours) General factory (organization-sustaining) Required 1 Required 2 Required: 1. Compute the activity rate for each activity cost pool. 2. Determine the unit product cost of each product according to the ABC system. Complete this question by entering your answers in the tabs below. Compute the activity rate for each activity cost pool. Activity Cost Pool Machine setups Special…
Clearview Window Company manufactures windows for the home-building industry. The window frames are produced in the Frame Division. The frames are then transferred to the Glass Division, where the glass and hardware are installed. The company’s best-selling product is a three-by-four-foot, doublepaned operable window. The Frame Division also can sell frames directly to custom home builders, who install the glass and hardware. The sales price for a frame is $80. The Glass Division sells its finished windows for $190. The markets for both frames and finished windows exhibit perfect competition. The standard variable cost of the window is detailed as follows: Frame Division Glass Division Direct material $ 15 $ 30 * Direct labor 20 15 Variable overhead 30 30 Total $ 65 $ 75 *Not including the transfer price for the frame. Assume that there is no excess capacity in the Frame Division. Required: 1-a. Use the general rule to compute the transfer price for window frames. 1-b. Calculate the…
Lloyd Gettys, a client of Kevin Lomax, is considering two different processes to make his product—process 1 and process 2. Process 1 requires Lloyd to manufacture subcomponents of the product in-house. As a result, materials are less expensive, but fixed overhead is higher. Process 2 involves purchasing all subcomponents from outside suppliers. The direct materials costs are higher, but fixed factory overhead is considerably lower. Relevant data for a sales level of 30,000 units follow: Process 1 Process 2 Sales $8,010,000 $8,010,000 Variable expenses 2,700,000 4,200,000 Contribution margin $5,310,000 $3,810,000 Less total fixed expenses 3,650,625 1,428,750 Operating income $1,659,375 $2,381,250 Unit selling price $267 $267 Unit variable cost $90 $140 Unit contribution margin $177 $127 a. Compute the degree of operating leverage for each process. b. Suppose that sales are 20 percent higher than budgeted. By what percentage will operating income increase for each process? What will be…
Good Scent, Inc., produces two colognes: Rose and Violet. Of the two, Rose is more popular. Data concerning the two products follow: Rose Violet Expected sales (in cases) Selling price per case Direct labor hours Machine hours Receiving orders Packing orders Material cost per case Direct labor cost per case $9 The company uses a conventional costing system and assigns overhead costs to products using direct labor hours. Annual overhead costs follow. They are classified as fixed or variable with respect to direct labor hours. Fixed Direct labor benefits Machine costs Receiving department Packing department Total costs * All depreciation 55,000 11,000 $101 36,650 5,550 10,350 3,200 $ 50 - 97 $49 $82 27 53 Variable $215,220 218,500* 291,180 241,000 126,000 $585,500 $506,400 $42 $6 Required: 1. Using the conventional approach, compute the number of cases of Rose and the number of cases of Violet that must be sold for the company to break even. In your computations, round variable unit cost…
Thermal Rising, Incorporated, makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management designed an activity-based costing system with the following activity cost pools and activity rates: Activity Cost Pool Supporting direct labor Order processing Custom design processing Customer service Activity Rate $ 20 per direct labor-hour $ 190 per order $ 255 per custom design $ 420 per customer Management wants to calculate the profitability of a particular customer, Big Sky Outfitters, which ordered the following products over the last 12 months: Number of gliders Number of orders. Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider Standard Model 15 2 0 28.50 $ 1,850 $ 472 Custom Design 3 3 3 33.00 $ 2,400 $ 576 The company's direct labor rate is $20 per hour. Required: Using the company's activity-based costing system,…
Thermal Rising, Incorporated, makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management designed an activity-based costing system with the following activity cost pools and activity rates: Activity Cost Pool Supporting direct labor Order processing Custom design processing Customer service Activity Rate $ 20 per direct labor-hour $ 200 per order $ 257 per custom design $ 426 per customer Management wants to calculate the profitability of a particular customer, Big Sky Outfitters, which ordered the following products over the last 12 months: Number of gliders Number of orders Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider Standard Custom Model Design 16 2 2 2 0 2 27.50 33.00 $ 1,900 $ 456 $ 2,440 $ 574 The company's direct labor rate is $20 per hour. Required: Using the company's activity-based costing system,…
Thermal Rising, Incorporated, makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management designed an activity-based costing system with the following activity cost pools and activity rates: Activity Cost Pool Supporting direct labor Order processing Custom design processing Customer service Activity Rate $20 per direct labor-hour $ 188 per order $ 257 per custom design $ 422 per customer Management wants to calculate the profitability of a particular customer, Big Sky Outfitters, which ordered the following products over the last 12 months: Number of gliders Number of orders Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider Standard Model Custom Design 11 1 0 26.50 3 3 3 33.00 $ 1,825 $ 2,430 $ 470 $ 576 The company's direct labor rate is $20 per hour. Required: Using the company's activity-based costing system,…