The Josh-Lester Corporation, manufacturer of tractors and other heavy farm equipment, is organized along decentralized product lines, with each manufacturing division operating as a separate profit center. Each division manager has been delegated full authority on all decisions nvolving the sale of that division's output both to outsiders and to other divisions of Josh-Lester. i(Click the icon to view the information on the divisions.) Less: C Contribution margin from selling units to other customers The company already completed an analysis to determine if it was in its best interest have division C purchase 1,300 units from an external supplier for $125 per unit, assuming that there are no alternative uses for internal facilities of division A. (Click the icon to view the results of the analysis.) Begin by calculating the contribution margin from selling units to other customers. Then calculate the net benefit (cost) to the company as a whole. (Enter a net cost using parentheses or a minus sign.) Now, assume that division A can sell the 1,300 units to other customers at $151 per with variable marketing costs of $6 per unit. Read the requirement.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Division C has in the past always purchased its requirement of a
particular tractor-engine component from division A. However, when informed that
division A is increasing its selling price to $145, division C's manager decides to
purchase the engine component from external suppliers.
Division C can purchase the component for $125 per unit in the open market.
Division A insists that, because of the recent installation of some highly specialized
equipment and the resulting high depreciation charges, it will not be able to earn
an adequate return on its investment unless it raises its price. Division A's manager
appe to management of Josh - Lester for support in the dispute with division
C and supplies the following operating data:
C's annual purchases of the tractor-engine component
A's variable cost per unit of the tractor-engine component
A's fixed cost per unit of the tractor-engine component
I
X
1,300 units
$105
$30
Data table
Purchase costs paid to external suppliers
Less: Savings in variable costs
Net cost to the company as a result of purchasing from external suppliers
Print
Done
$
162,500
136,500
26,000
I
X
Transcribed Image Text:More info Division C has in the past always purchased its requirement of a particular tractor-engine component from division A. However, when informed that division A is increasing its selling price to $145, division C's manager decides to purchase the engine component from external suppliers. Division C can purchase the component for $125 per unit in the open market. Division A insists that, because of the recent installation of some highly specialized equipment and the resulting high depreciation charges, it will not be able to earn an adequate return on its investment unless it raises its price. Division A's manager appe to management of Josh - Lester for support in the dispute with division C and supplies the following operating data: C's annual purchases of the tractor-engine component A's variable cost per unit of the tractor-engine component A's fixed cost per unit of the tractor-engine component I X 1,300 units $105 $30 Data table Purchase costs paid to external suppliers Less: Savings in variable costs Net cost to the company as a result of purchasing from external suppliers Print Done $ 162,500 136,500 26,000 I X
The Josh - Lester Corporation, manufacturer of tractors and other heavy farm equipment, is
organized along decentralized product lines, with each manufacturing division operating as a
separate profit center. Each division manager has been delegated full authority on all decisions
involving the sale of that division's output both to outsiders and to other divisions of Josh - Lester.
i(Click the icon to view the information on the divisions.)
Begin by calculating the contribution margin from selling units to other customers. Then calculate the net benefit (cost) to the company as a whole. (Enter a net cost using parentheses or a
minus sign.)
Less:
The company already completed an analysis to determine if it was in its best interest to
have division C purchase 1,300 units from an external supplier for $125 per unit,
assuming that there are no alternative uses for internal facilities of division A.
(Click the icon to view the results of the analysis.)
Now, assume that division A can sell the 1,300 units to other customers at $151 per unit,
with variable marketing costs of $6 per unit.
Read the requirement.
Contribution margin from selling units to other customers
Transcribed Image Text:The Josh - Lester Corporation, manufacturer of tractors and other heavy farm equipment, is organized along decentralized product lines, with each manufacturing division operating as a separate profit center. Each division manager has been delegated full authority on all decisions involving the sale of that division's output both to outsiders and to other divisions of Josh - Lester. i(Click the icon to view the information on the divisions.) Begin by calculating the contribution margin from selling units to other customers. Then calculate the net benefit (cost) to the company as a whole. (Enter a net cost using parentheses or a minus sign.) Less: The company already completed an analysis to determine if it was in its best interest to have division C purchase 1,300 units from an external supplier for $125 per unit, assuming that there are no alternative uses for internal facilities of division A. (Click the icon to view the results of the analysis.) Now, assume that division A can sell the 1,300 units to other customers at $151 per unit, with variable marketing costs of $6 per unit. Read the requirement. Contribution margin from selling units to other customers
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