Jaden Munrovia is the CEO of Lime Ricky, a producer of premium ice cream. Lime Ricky has two divisions, the supplying division and the processing division.i (Click the icon to view the additional information regarding the divisions.)Read the requirementsRequirement 1. What is the profit for the supplying division of supplying 10 gallons of milk to the processing division under Jaden's transfer pricing system? Do you think that the transfer pricingsystem incentivizes the managers of the supplying division to work hard, as Jaden intends?What is the profit for the supplying division of supplying 10 gallons of milk to the processing division under Jaden's transfer pricing system? Select the formula and enter the amounts to calculate theprofit for the supplying division. (Complete all input fields. Enter a 0 for any zero balances.)=Profit for the supplyingdivision More infoThe supplying division supplies milk, the main ingredient, to the processingdivision. Jaden is an ambitious entrepreneur, and he is hoping to soon sellLime Ricky, which is a private company, to one of the larger competitors. Thesupplying division buys milk from local farmers for $13 per 10 gallons, and incurs$3 of variable costs per 10 gallons transported to the processing division (thesupplying division doesn't incur any material fixed costs). The processing divisioncould buy milk of the same high quality for $19 per 10 gallons on the outsidemarket. Jaden is trying to "whip his company into shape" by implementing atransfer pricing system that he views as providing very strong incentives for the twodivisions to work hard: The supplying division will get reimbursed for itsincremental costs of supplying the milk to the processing division; the processingdivision is charged the price that it would have to pay on the open market.

The price charged for the goods and services transferred among the divisions are referred to as…

Answered: The supplying division supplies milk,…

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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Coronado Makeup produces face cream. Each bottle of face cream costs $12 to produce and can be sold for $13. The bottles can be sold as is, or processed further into sunscreen at a cost of $14 each. Coronado Makeup could sell the sunscreen bottles for $23 each. What should Coronado Makeup do? Face cream must be further processed because it increases operating income by $1 each. O Face cream must not be further processed because incremental revenue is less than incremental processing costs. O Face cream must be further processed because its operating income is $9 each. Face cream must not be further processed because it decreases operating income by $3 each.
Glide Behind Corporation manufactures and sells small cargo trailers. The Wheel Division creates parts that are both sold externally and transferred internally to the Assembly Division. Variable production costs of wheel set #102 are $80, and each set sells externally for $150. What would you recommend as the internal transfer price from the Wheel Division to the Assembly Division if a competitive external market exists for wheel set #102? Would your answer change if there were no external market this component? Why? What would the transfer price be if upper management required cost plus 25 percent as the transfer price?
Having trouble with some questions from the last chapter.
We Can Reach It produces ladders for household use. The company makes two types: step ladders and 12-foot adjustable ladders. Demand for the products is so high that We Can Reach It can sell as many of each size as it can produce. The company uses the same machinery to produce both products. The machinery can only run for 1,990 hours per period. We Can Reach It can produce 12, 12-foot ladders every hour, whereas it can produce 16 step ladders in the same amount of time. Fixed costs amount to $120,800 per period.Sales prices and variable costs are as follows: Step ladder 12-foot ladder Sales price per unit $21.70 $37.00 Variable cost per unit $8.75 $23.30 Contribution Margin per unit 1. Calculate the Contribution Margin per machine hour. Step ladder 12-foot ladder Ladders produced per hour Contribution margin per ladder type Contribution margin per machine hour 2. To maximize profit, which product should they emphasize: 3. What will the…
Elroy Racers makes bicycles. It has always purchased its bicycle tires from the M. Wilson Tires at $25 each but is currently considering making the tires in its own factory. The estimated costs per unit of making the tires are as follows: Direct materials $8 Direct labor $5 Variable manufacturing overhead $7 The company’s fixed expenses would increase by $60,000 per year if managers decided to make the tire.(b)What qualitative factors should Elroy Racers consider in making this decision?
Waterways has discovered that a small fitting it now manufactures at a unit cost of $1.00 could be bought elsewhere for $0.81 per unit. Waterways has unit fixed manufacturing costs of $0.20 that cannot be eliminated by buying this unit. Waterways needs 465,000 of these units each year.If Waterways decides to buy rather than produce the small fitting, it can devote the machinery and labor to making a timing unit it now buys from another company. Waterways uses approximately 400 of these units each year. The cost of the unit is $12.33. To aid in the production of this unit, Waterways would need to purchase a new machine at a cost of $2,344, and the unit cost of producing the units would be $9.40. Without considering the possibility of making the timing unit, evaluate whether Waterways should buy or continue to make the small fitting. The company should (make or buy?) the fitting. Incremental cost / (savings) will be
Dake Bakery is purchasing heavy cream from an outside suppliers. The comapny's dairy division, which has no excess capacity, makes and sells heavy cream at a variable cost of $32 per gallon and a selling price of $59 per gallon. If the dairy division begins sales to the bakery, it willl use the general transfer pricing rule and will be able to reduce vvariable cost on internal transfer by $5 per gallon. How much is the minimum transfer price per gallon that the dairy division should establish?
Lim has already spent $30,700 to manufacture a hamster food product called Pet Health. Lim currently has 10,000 bags of Pet Health on hand that can be sold for $94,480. Alternatively, Lim can process it further into a different product, Premium Pet, at an additional cost of $6,350. If Lim processes further, the Premium Pet can be sold for $102,900. This would result in revenue of: Multiple Choice $102,900. $100,830. $8,420. $2,070. $6,350.
Speed Racer in Victoria makes bicycles for people of all ages. The frames division makes and paints the frames and supplies them to the assembly division where the bicycles are assembled. Speed Racer is a successful and profitable corporation that attributes much of its success to its decentralized operating style. Each division manager is compensated on the basis of division operating income. The assembly division currently acquires all its frames from the frames division. The assembly division manager could purchase similar frames in the market for $480. The frames division is currently operating at 80% of its capacity of 4,000 frames (units) and has the following details: Voltage Regulator Direct materials ($150 per unit x 320 units) $480,000 Direct manufacturing labour ($60 per unit x 3,200 units) 192,000 Variable manufacturing overhead costs ($30 per unit × 3,200 units) 96,000 Fixed manufacturing overhead costs $624,000 All the frames…
Youngstown Glass Company manufactures three types of safety plate glass: large, medium, and small. All three products have high demand. Thus, Youngstown Glass is able to sell all the safety glass that it can make. The production process includes an autoclave operation, which is a pressurized heat treatment. The autoclave is a production bottleneck. Total fixed costs are $160,000 for the company as a whole. In addition, the following information is available about the three products: Large Medium Small Unit selling price $353 $253 $133 Unit variable cost (278) (207) (117) Unit contribution margin $ 75 $ 46 $ 16 Autoclave hours per unit 6 4 2 Total process hours per unit 12 8 6 Budgeted units of production 2,600 2,600 2,600 a. Determine the contribution margin by glass type and the total company operating income for the budgeted units of production. Large Medium Small Total Units…

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