Word Monty is a publishing company with a number of different book lines. Each line has contracts with a number of different authors. The company also owns a printing operation called Quick Press. The book lines and the printing operation each operate as a separate profit center. The printing operation earns revenue by printing books by authors under contract with the book lines owned by Word Monty, as well as authors under contract with other companies. The printing operation bills out at $0.01 per page, and a typical book requires 470 pages of print. A manager from Business Books, one of Word Monty's book lines, has approached the manager of the printing operation offering to pay $0.006 per page for 1,500 copies of a 470-page book. The book line pays outside printers $0.008 per page. The printing operation's variable cost per page is $0.003. Determine whether the printing should be done internally or externally, and the appropriate transfer price, under each of the following situations. (a) Assume that the printing operation is booked solid for the next 2 years, and it would have to cancel an obligation with an outside customer in order to meet the needs of the internal division. (Round Transfer price to 4 decimal places, e.g. 0.1810.) Printing should be done Minimum transfer price $
Word Monty is a publishing company with a number of different book lines. Each line has contracts with a number of different authors. The company also owns a printing operation called Quick Press. The book lines and the printing operation each operate as a separate profit center. The printing operation earns revenue by printing books by authors under contract with the book lines owned by Word Monty, as well as authors under contract with other companies. The printing operation bills out at $0.01 per page, and a typical book requires 470 pages of print. A manager from Business Books, one of Word Monty's book lines, has approached the manager of the printing operation offering to pay $0.006 per page for 1,500 copies of a 470-page book. The book line pays outside printers $0.008 per page. The printing operation's variable cost per page is $0.003. Determine whether the printing should be done internally or externally, and the appropriate transfer price, under each of the following situations. (a) Assume that the printing operation is booked solid for the next 2 years, and it would have to cancel an obligation with an outside customer in order to meet the needs of the internal division. (Round Transfer price to 4 decimal places, e.g. 0.1810.) Printing should be done Minimum transfer price $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Word Monty is a publishing company with a number of different book lines. Each line has contracts with a number of different authors.
The company also owns a printing operation called Quick Press. The book lines and the printing operation each operate as a separate
profit center. The printing operation earns revenue by printing books by authors under contract with the book lines owned by Word
Monty, as well as authors under contract with other companies. The printing operation bills out at $0.01 per page, and a typical book
requires 470 pages of print. A manager from Business Books, one of Word Monty's book lines, has approached the manager of the
printing operation offering to pay $0.006 per page for 1,500 copies of a 470-page book. The book line pays outside printers $0.008
per page. The printing operation's variable cost per page is $0.003.
Determine whether the printing should be done internally or externally, and the appropriate transfer price, under each of the
following situations.
(a)
Assume that the printing operation is booked solid for the next 2 years, and it would have to cancel an obligation with an outside
customer in order to meet the needs of the internal division. (Round Transfer price to 4 decimal places, e.g. 0.1810.)
Printing should be done
Minimum transfer price $
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