Need help with this financial accounting question Western Freight Railways has two divisions, the Western Division and the FreightDivision. The company recently invested $10,000,000 to maintain its railroadtrack.Pertinent data for the two divisions are as follows:Total miles travelled:Western Division: 900,000 milesFreight Division: 1,500,000 milesWhat is the risk improvement cost that should be allocated to theWestern Division? (Do not round intermediate calculations.)

Step 1: Define Cost Allocation Based on UsageCost allocation is the process of distributing a total…

Answered: Western Freight Railways has two…

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 18E

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Assume that Division A has a product that can be sold either to Division B of the same company or to outside customers. The managers of both divisions are evaluated based on their own division's return on investment (ROI). The managers are free to decide if they will participate in any internal transfers. All transfer prices are negotiated. Division A: Capacity in units = 300,000 Number of units now being sold to outside customers = 300,000 Selling price per unit on the outside market = $41 Variable costs per unit = $19 Fixed costs per unit (based on capacity) = 12 Division B: Number of units needed annually = 100,000 Purchase price now being paid to an outside supplier = $38 Assume that Division A can avoid $6 per unit in variable costs on any sales to Division B. Which one of the following statements is most correct regarding the division managers' response to the opportunity for the internal transfer? the managers will not agree to a transfer the managers will agree to a transfer at…
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