Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 10, Problem 12E
1.
To determine
Identify the minimum transfer price that Division G would be willing to accept, identify the maximum transfer price that the Division BW would be willing to pay. Identify whether the internal transfer takes place or not, if yes compute the benefit or loss to the firm as a whole.
2.
To determine
Identify whether the Person E is interested in the change in the transfer price 2.40. Support the decision with calculations.
3.
To determine
In case, the internal transfer takes place at full
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Steinberg Company produces commercial printers. One is the regular model, a basic model that is designed to copy and print in black and white. Another model, the deluxe model, is a color printer-scanner-copier. For the coming year, Steinberg expects to sell 90,000 regular models and 18,000 deluxe models. A segmented income statement for the two products is as follows:
Regular Model
Deluxe Model
Total
Sales
$13,500,000
$12,240,000
$25,740,000
Less: Variable costs
8,100,000
7,344,000
15,444,000
Contribution margin
$5,400,000
$4,896,000
$10,296,000
Less: Direct fixed costs
1,200,000
960,000
2,160,000
Segment margin
$4,200,000
$3,936,000
$8,136,000
Less: Common fixed costs
1,500,800
Operating income
$6,635,200
Required:
1. Compute the number of regular models and deluxe models that must be sold to break even. Round your answers to the nearest whole unit.
Regular…
Crede Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps.
Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $10.10 from an outside vendor. Division A needs 11,100 lamps for the coming year.
Division B has the capacity to manufacture 49,600 lamps annually. Sales to outside customers are estimated at 38,500 lamps for the next year. Reading lamps are sold at $12.09 each. Variable costs
are $6.87 per lamp and include $1.41 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $75,900. Consider the
following independent situations.
What should be the minimum transfer price accepted by Division B for the 11,100 lamps and the maximum transfer price paid by Division A? (Round answers to 2 decimal places, e.g. 15.25.)
Per unit
Minimum transfer price accepted by Division B $_
Maximum transfer…
Blossom Motors is a division of Blossom Products Corporation. The division manufactures and sells an electric switch used in a wide
variety of applications. During the coming year, it expects to sell 180,000 units for $8.00 per unit. Donna Clark is the division manager.
She is considering producing either 180,000 or 280,000 units during the period. Other information is as follows:
Beginning inventory
Expected sales in units
Selling price per unit
Variable manufacturing cost per unit
Fixed manufacturing cost (total)
Fixed manufacturing overhead costs per unit
Based on 180,000 units
Based on 280,000 units
Manufacturing cost per unit
Based on 180,000 units
(a)
Based on 280,000 units
Variable selling and administrative expenses
Fixed selling and administrative expenses (total)
- Your answer is partially correct.
Units produced
Units sold
(b)
Sales
Less
Prepare an absorption-costing income statement, with one column showing the results if 180,000 units are produced and one
column showing…
Chapter 10 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 10 - Prob. 1DQCh. 10 - Explain why firms choose to decentralize.Ch. 10 - Explain how access to local information can...Ch. 10 - What are margin and turnover? Explain how these...Ch. 10 - What are the three benefits of ROI? Explain how...Ch. 10 - What are two disadvantages of ROI? Explain how...Ch. 10 - What is residual income? Explain how residual...Ch. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - What is a transfer price?
Ch. 10 - Prob. 11DQCh. 10 - If the minimum transfer price of the selling...Ch. 10 - If an outside, perfectly competitive market exists...Ch. 10 - Prob. 14DQCh. 10 - Prob. 15DQCh. 10 - Forchen, Inc., provided the following information...Ch. 10 - Refer to Cornerstone Exercise 10.1. Forchen, Inc.,...Ch. 10 - Ignacio, Inc., had after-tax operating income last...Ch. 10 - Prob. 4CECh. 10 - Prob. 5CECh. 10 - Prob. 6CECh. 10 - Jarriot, Inc., presented two years of data for its...Ch. 10 - Refer to Exercise 10.7 for data. At the end of...Ch. 10 - Refer to the data given in Exercise 10.8....Ch. 10 - Brewster Company manufactures elderberry wine....Ch. 10 - Xenold, Inc., manufactures and sells cooktops and...Ch. 10 - Prob. 12ECh. 10 - Jocassee Furniture Manufacturing, Inc., has a...Ch. 10 - Prob. 14ECh. 10 - Mossfort, Inc., has a division in Canada that...Ch. 10 - A multinational corporation has a number of...Ch. 10 - Consider the data for each of the following four...Ch. 10 - The following selected data pertain to the Argent...Ch. 10 - Prob. 19ECh. 10 - The key difference between residual income and EVA...Ch. 10 - If sales and average operating assets for Year 2...Ch. 10 - Prob. 22ECh. 10 - Refer to 10.22. If the imputed interest rate is...Ch. 10 - A company had WACC (weighted average cost of...Ch. 10 - Prob. 25PCh. 10 - Raddington Industries produces tool and die...Ch. 10 - Prob. 27PCh. 10 - Prob. 28PCh. 10 - Oriole, Inc., owns a number of food service...Ch. 10 - Prob. 30PCh. 10 - Prob. 31PCh. 10 - Renslen, Inc., a truck manufacturing conglomerate,...Ch. 10 - Jump Start Company (JSC), a subsidiary of Mason...Ch. 10 - Prob. 34PCh. 10 - Grate Care Company specializes in producing...
Knowledge Booster
Similar questions
- Blue Spruce Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $10 from an outside vendor. Division A needs 8,200 lamps for the coming year. Division B has the capacity to manufacture 41,000 lamps annually. Sales to outside customers are estimated at 32,800 lamps for the next year. Reading lamps are sold at $12 each. Variable costs are $7 per lamp and include $1 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $65,600. Consider the following independent situations. (a) What should be the minimum transfer price accepted by Division B for the 8,200 lamps and the maximum transfer price paid by Division A? Minimum transfer price accepted by Division B Maximum transfer price paid by Division A $ $ per unit per unitarrow_forwardFlounder Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $10 from an outside vendor. Division A needs 9,000 lamps for the coming year. Division B has the capacity to manufacture 45,000 lamps annually. Sales to outside customers are estimated at 36,000 lamps for the next year. Reading lamps are sold at $12 each. Variable costs are $7 per lamp and include $2 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $72,000. Consider the following independent situations.arrow_forwardGermano Products, Incorporated, has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below: Capacity in units 72,500 Selling price to outside customers $ 79 Variable cost per unit $ 28 Fixed cost per unit (based on capacity) $ 32 The Pool Products Division is currently purchasing 17,000 of these pumps per year from an overseas supplier at a cost of $74 per pump. Assume that the Pump Division is selling all of the pumps it can produce to outside customers. Does there exist a transfer price that would make both the Pump and Pool Products Division financially better off than if the Pool Products Division were to continue buying its pumps from the outside supplier?arrow_forward
- Soft Cushion Company is highly decentralized. Each division is empowered to make its own sales decisions. The Assembly Division can purchase stuffing, a key component, from the Production Division or from external suppliers. The Production Division has been the major supplier of stuffing in recent years. The Assembly Division has announced that two external suppliers will be used to purchase the stuffing at $26per pound for the next year. The Production Division recently increased its unit price to $54.The manager of the Production Division presented the following information — variable cost $38 and fixed cost $14 — to top management in order to attempt to force the Assembly Division to purchase the stuffing internally. The Assembly Division purchases 21,000 pounds of stuffing per month. What would be the monthly operating advantage (disadvantage) of purchasing the goods internally, assuming the external supplier increased its price to $88 per pound and the Production Division…arrow_forwardWetherald Products, Incorporated, has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below: Capacity in units 55,000 Selling price to outside customers $ 82 Variable cost per unit $53 Fixed cost per unit (based on capacity) $11 The Pool Products Division is currently purchasing 4,000 of these pumps per year from an overseas supplier at a cost of $74 per pump. Assume that the Pump Division has enough idle capacity to handle all of the Pool Products Division's needs. What should be the minimum acceptable transfer price for the pumps from the standpoint of the Pump Division? Multiple Choice $74 per unit $53 per unit $64 per unit $82 per unitarrow_forwardWildhorse Motors is a division of Wildhorse Products Corporation. The division manufactures and sells an electric switch used in a wide variety of applications. During the coming year, it expects to sell 210,000 units for $8.00 per unit. Nancy Jackson is the division manager. She is considering producing either 210,000 or 240,000 units during the period. Other information is as follows: Division Information for 2022 0 Beginning inventory Expected sales in units Selling price per unit Variable manufacturing cost per unit Fixed manufacturing cost (total) Fixed manufacturing overhead costs per unit Based on 210,000 units Based on 240,000 units Manufacturing cost per unit Based on 210,000 units Based on 240,000 units Variable selling and administrative expenses Fixed selling and administrative expenses (total) 210,000 $8.00 $2.30 $504,000 $2.40 per unit ($504,000 ÷ 210,000) $2.10 per unit ($504,000 ÷ 240,000) $4.70 per unit ($2.30 variable + $2.40 fixed) $4.40 per unit ($2.30 variable +…arrow_forward
- A. Compute the total targeted production of the finished product for the coming year. B. Compute the required amount of plastic to be purchased for the coming year.arrow_forwardA. Compute the total targeted production of the finished product for the coming year. B. Compute the required amount of plastic to be purchased for the coming year.arrow_forwardOsborne Manufacturing produces self-watering planters for use in upscale retail establishments. Sales projections for the first five months of the upcoming year show the estimated unit sales of the planters each month to be as follows: The data from the table are as follows: # of planters to be sold January: 3,400 February: 3,800 March: 3,300 April: 4,900 May: 4,600. Inventory at the start of the year was 850 planters. The desired inventory of planters at the end of each month in the upcoming year should be equal to 25% of the following month’s budgeted sales. Each planter requires three pounds of polypropylene (a type of plastic). The company wants to have 20% of the polypropylene required for next month’s production on hand at the end of each month. The polypropylene costs $0.20 per pound. Requirements Prepare a production budget for each month in the first quarter of the year,…arrow_forward
- Caldwell Supply, a wholesaler, has determined that its operations have three primary activities: purchasing, warehousing, and distributing. The firm reports the following operating data for the year just completed: Caldwell buys 100,900 units at an average unit cost of $19 and sells them at an average unit price of $29. The firm also has fixed operating costs of $250,900 for the year. Caldwell's customers are demanding a 19% discount for the coming year. The company expects to sell the same amount if the demand for price reduction can be met. Caldwell's suppliers, however, are willing to give only a 14% discount. Required: Caldwell has estimated that it can reduce the number of purchase orders to 770 and can decrease the cost of shipment by $12 with minor changes in its operations. Any further cost savings must come from reengineering the warehousing processes. What is the maximum cost (i.e., target cost) for warehousing if the firm desires to earn the same amount of profit next year?arrow_forwardThe Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the company’s products is increasing, and management requests assistance from you in determining an economical sales and production mix for the coming year. The company has provided the following data (please see attachment): The following additional information is available: The company’s plant has a capacity of 137,510 direct labor-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products. The direct labor rate of $8 per hour is expected to remain unchanged during the coming year. Fixed manufacturing costs total $550,000 per year. Variable overhead costs are $2 per direct labor-hour. All of the company’s nonmanufacturing costs are fixed. The company’s finished goods inventory is negligible and can be ignored. Required: 1. How many direct labor hours are used to manufacture one unit of each of the company’s five products? 2. How…arrow_forwardStreeter Company produces plastic microwave turntables. Sales for the next year are expected to be 65,000 units in the first quarter, 72,000 units in the second quarter, 84,000 units in the third quarter, and 66,000 units in the fourth quarter. Streeter maintains a finished goods inventory at the end of each quarter equal to one half of the units expected to be sold in the next quarter. How many units should Streeter produce in the second quarter? Select one: a. 78,000 units b. 84,000 units c. 72,000 units d. 75,000 unitsarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning