- The Denver Corporation manufactures filing cabinets in two operations: machining and finishing. It provides the following information: Machining Finishing 100,000 units 100,000 units Annual capacity Annual production Fixed operating costs (excluding direct materials) Fixed operating costs per unit produced (S600,000 + 100,000; S300,000 + 100,000) 120,000 units 100,000 units $600,00 $6 per unit $300,000 $3 per unit Each cabinet sells for $75 and has direct material costs of $35 incurred at the start of the machining opera- tion. Denver has no other variable costs. Denver can sell whatever outout it produces. The following require- ments refer only to the preceding data.

- The Denver Corporation manufactures filing cabinets in two operations: machining and finishing. It provides the following information: Machining Finishing 100,000 units 100,000 units Annual capacity Annual production Fixed operating costs (excluding direct materials) Fixed operating costs per unit produced (S600,000 + 100,000; S300,000 + 100,000) 120,000 units 100,000 units $600,00 $6 per unit $300,000 $3 per unit Each cabinet sells for $75 and has direct material costs of $35 incurred at the start of the machining opera- tion. Denver has no other variable costs. Denver can sell whatever outout it produces. The following require- ments refer only to the preceding data.

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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I need an answer for number 2, please, thank you!
Division Y has asked Division X of the same company to supply it with 9,000 units of part L763 this year to use in one of its products. Division Y has received a bid from an outside supplier for the parts at a price of $53 per unit. Division X has the capacity to produce 36,000 units of part L763 per year. Division X expects to sell 32,400 units of part L763 to outside customers this year at a price of $58.00 per unit. To fill the order from Division Y, Division X would have to cut back its sales to outside customers. Division X produces part L763 at a varlable cost of $45 per unit. The cost of packing and shipping the parts for outside customers is $2 per unit. These packing and shipping costs would not have to be incurred on sales of the parts to Division Y. Required: a. What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of 9,000 parts this year from Division X to Division Y? (Round your final answers…
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I need an answer for number 1, please, thank you!
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