Total cost per barrel$60$117Manufacturing overhead cost in the Mining division is 25% fixed and 75% variable. In the Metals division, it is 60% fixed and 40%variable.(b) Using the market price as the transfer price, determine the contribution margins for both divisions for the last fiscal year. (RoundIntermediate calculations to 2 decimal places, eg. 12.25 and final answers to 0 decimal places, e.g. 125.)MiningMetals$$Total contribution margin(c) If Martinez Consolidated were to institute negotiated transfer prices and allow divisions to buy and sell on the open market, whatprice range for toldine would be acceptable to both divisions?Minimum transfer price that mining will accept$$Maximum price that metals will pay Current Attempt in ProgressMartinez Consolidated has several divisions, two of which transfer their products to other divisions. The Mining division refinestoldine, which it then transfers to the Metals division. The Metals division processes the toldine into an alloy and sells it to customersat a price of $152 per barrel. Martinez currently requires the Mining division to transfer its total annual output of 412.500 barrels oftoldine to the Metals division at total manufacturing cost plus 10%. Unlimited quantities of toldine can be purchased and sold on theopen market at $91 per barrel. While the Mining division could sell all the toldine it produces on the open market at $91 per barrel, itwould incur a variable selling cost of $5 per unit to do so.Barker Jonas, manager of the Mining division, is unhappy with having to transfer the division's entire output of toldine to the Metalsdivision at 110% of cost. In a meeting with the management of Martinez, he protested, "Why should my division be required to selltoldine to the Metals Division at less than market price? For the year just ended in May. Metals' contribution margin was over $20million on sales of 412.500 barrels, while Mining's contribution on the transfer of the same number of units was just over $5 million.My division is subsidizing the profitability of the Metals division. We should be allowed to charge market price for toldine when wetransfer it to the Metals division.Detailed unit costs for both the Mining and Metals divisions follow.Mining DivisionMetals DivisionTransfer price from Mining division$66Direct material$126Direct labor1820Manufacturing overhead3025Total cost per barrel$60$117

The question is based on the concept of Cost Accounting.

Total cost per barrel $60 $117 Manufacturing overhead cost in the Mining division is 25% fixed and 75% variable. In the Metals division, it is 60% foxed and 40% variable. (b) Using the market price as the transfer price, determine the contribution margins for both divisions for the last fiscal year. (Round intermediate calculations to 2 decimal places, eg. 12.25 and final answers to O decimal places, e.g. 125.) Mining Metals $ Total contribution margin (c) If Martinez Consolidated were to institute negotiated transfer prices and allow divisions to buy and sell on the open market, what

Total cost per barrel $60 $117 Manufacturing overhead cost in the Mining division is 25% fixed and 75% variable. In the Metals division, it is 60% foxed and 40% variable. (b) Using the market price as the transfer price, determine the contribution margins for both divisions for the last fiscal year. (Round intermediate calculations to 2 decimal places, eg. 12.25 and final answers to O decimal places, e.g. 125.) Mining Metals $ Total contribution margin (c) If Martinez Consolidated were to institute negotiated transfer prices and allow divisions to buy and sell on the open market, what

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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