Whispering Winds Corporation manufactures car stereos. It is a division of Berna Motors, which manufactures vehicles. WhisperingWinds sells car stereos to Berna, as well as to other vehicle manufacturers and retail stores. The following information is available forWhispering Winds's standard unit: unit variable cost $36, unit fixed cost $22, and unit selling price to outside customer $85. Bernacurrently purchases a standard unit from an outside supplier for $80. Because of quality concerns and to ensure a reliable supply, thetop management of Berna has ordered Whispering Winds to provide 224,000 units per year at a transfer price of $34 per unit.Whispering Winds is already operating at full capacity. Whispering Winds can avoid $3 per unit of variable selling costs by selling theunit internally.Answer each of the following questions.(a)Your AnswerCorrect Answer (Used)What is the minimum transfer price that Whispering Winds should accept?Minimum transfer price$82

To determine the minimum transfer price that Whispering Winds should accept, we need to consider the…

Answered: Whispering Winds Corporation…

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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Blue Spruce Corporation manufactures car stereos. It is a division of Berna Motors, which manufactures vehicles. Blue Spruce sells car stereos to Berna, as well as to other vehicle manufacturers and retail stores. The following information is available for Blue Spruce's standard unit: unit variable cost $36, unit fixed cost $22, and unit selling price to outside customer $85. Berna currently purchases a standard unit from an outside supplier for $80. Because of quality concerns and to ensure a reliable supply, the top management of Berna has ordered Blue Spruce to provide 164,000 units per year at a transfer price of $34 per unit. Blue Spruce is already operating at full capacity. Blue Spruce can avoid $3 per unit of variable selling costs by selling the unit internally. Answer each of the following questions. What is the minimum transfer price that Blue Spruce should accept? Minimum transfer price eTextbook and Media $ What is the potential loss to the corporation as a whole resulting…
Crane Industries manufactures sump-pumps. Its most popular product is called the Super Soaker, which has a retail price of $1,230 and costs $570 to manufacture. It sells the Super Soaker on a standalone basis directly to businesses. Crane also provides installation services for these commercial customers, who want an emergency pumping capability (with regular and back-up generator power) at their businesses. Crane also distributes the Super Soaker through a consignment agreement with Menards. Income data for the first quarter of 2025 from operations other than the Super Soaker are as follows. Revenues Expenses $9.571,000 7,122,000 Crane has the following information related to two Super Soaker revenue arrangements during the first quarter of 2025. 1. Crane sells 30 Super Soakers to businesses in flood-prone areas for a total contract price of $59,100. In addition to the pumps, Crane also provides installation (at a cost of $160 per pump). On a standalone basis, the fair value of this…
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Bria Furniture sells bed frames and mattresses. One of its products is a premium therapeutic bed set produced by OmniSleep, which comes with a mattress and a bed frame. Bria offers a package consisting of the mattress, the frame, and on-site installation by its staff. All of these components can be sold separately, as often done by other vendors, so Bria concludes that these are separate performance obligations. Bria sells the OmniSleep package for $3,000. The mattress and the frame are sold separately for $2,000 and $900, respectively. Other vendors in the same area typically charge $200 for on-site installation. Bria does not sell on-site installation separately. On average, the prices charged by Bria are 10% higher than those of its competitors. Bria estimates that it incurs about $100 of compensation and other costs to provide the installation service. The profit margin over cost is estimated to be approximately 35%. Required: (a) Estimate the stand-alone selling price of the…
Wildhorse Center is an experienced home appliance dealer. Wildhorse Center also offers a number of services for the home appliances that it sells. Assume that Wildhorse Center sells ovens on a standalone basis. Wildhorse Center also sells installation services and maintenance services for ovens. However, Wildhorse Center does not offer installation or maintenance services to customers who buy ovens from other vendors. Pricing for ovens is as follows. Oven only $820 Oven with installation service $830 Oven with maintenance services. $980 Oven with installation and maintenance services $891 In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $160. Additionally, the incremental amount charged by Wildhorse Center for installation approximates the amount charged by independent third parties. Ovens are sold subject to a general right of return. If a customer purchases an oven with installation and/or…
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Appliance Center is an experienced home appliance dealer. Appliance Center also offers a number of services for the home appliances that it sells. Assume that Appliance Center sells ovens on a standalone basis. Appliance Center also sells installation services and maintenance services for ovens. However, Appliance Center does not offer installation or maintenance services to customers who buy ovens from other vendors. Pricing for ovens is as follows. Oven only $800 Oven with installation service 870 Oven with maintenance services 980 Oven with installation and maintenance services 1,020 In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $180. Additionally, the incremental amount charged by Appliance Center for installation approximates the amount charged by independent third parties. Ovens are sold subject to a general right of return. If a customer purchases an oven with installation…
Vishnu
Video Planet (VP) sells a big screen TV package consisting of a 60-inch plasma TV, a universal remote, and on-site installation by VP staff. The installation includes programming the remote to have the TV interface with other parts of the customer’s home entertainment system. VP concludes that the TV, remote, and installation service are separate performance obligations. VP sells the 60-inch TV separately for $2,150 and sells the remote separately for $300, and offers the entire package for $2,700. VP does not sell the installation service separately. VP is aware that other similar vendors charge $350 for the installation service. VP also estimates that it incurs approximately $300 of compensation and other costs for VP staff to provide the installation service. VP typically charges 50% above cost on similar sales. Required:1. to 3. Calculate the stand-alone selling price of the installation service using each of the following approaches.
Naomi Appliance Store is an experienced home appliance dealer. Naomi also offers a number of services together with the home appliances that it sells. Assume that Naomi sells dishwashers on a standalone basis. Naomi also sells installation services and maintenance services for dishwashers. However, Naomi does not offer installation or maintenance services to customers who buy dishwashers from other vendors. Pricing for dishwashers is as follows. Dishwasher only $1,300 Dishwasher with Installation service 1,550 Dishwasher with maintenance services 1,600 Dishwasher with installation and maintenance services 1,750 In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $300. Additionally, the incremental amount charged by Naomi for installation approximates the amount charged by independent third parties. Dishwashers are sold subject to a general right of return. If a…
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Video Planet (VP) sells a big screen TV package consisting of a 60-inch plasma TV, a universal remote, and on-site installation by VP staff. The installation includes programming the remote to have the TV interface with other parts of the customer's home entertainment system. VP concludes that the TV, remote, and installation service are separate performance obligations. VP sells the 60-inch TV separately for $1,870 and sells the remote separately for $160, and offers the entire package for $2,140. VP does not sell the installation service separately. VP is aware that other similar vendors charge $210 for the installation service. VP also estimates that it incurs approximately $160 of compensation and other costs for VP staff to provide the installation service. VP typically charges 40% above cost on similar sales. Required: 1. to 3. Calculate the stand-alone selling price of the installation service using each of the following approaches. Adjusted market assessment Expected cost plus…

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