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.
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.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 8E: Rocky Mountain Airlines Inc. has two divisions organized as profit centers, the Passenger Division...
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![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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F54a4597e-3d99-4c20-8113-3401a2a6115b%2F98219f9a-634d-44f6-8f81-3fc94c9ced1a%2F6szgnrl_processed.png&w=3840&q=75)
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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F54a4597e-3d99-4c20-8113-3401a2a6115b%2F98219f9a-634d-44f6-8f81-3fc94c9ced1a%2Fegbnf5_processed.png&w=3840&q=75)
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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