Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN: 9781337115773
Author: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher: Cengage Learning
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Chapter 11, Problem 10MCQ
To determine
Identify minimum transfer price.
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Company E has two divisions, Division A and Division B. Division A is currently
buying Component X from an external seller for $12. Division B produces
Component X and has excess capacity.
Using the following data, what would the transfer price per unit if Division A
purchased Component X from Division B at the cost-based transfer price?
Variable cost per unit $7.48
• Fixed cost per unit 1.97
• Division B sales price of Component X 14.50
Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $13. Division B produces Component X and has excess capacity.
Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost-based transfer price?
Variable cost per unit $6.31
Fixed cost per unit 1.36
Division B sales price of Component X 14.5
Use this information for Square Yard Products Inc. to answer the question that follow.Materials used by Square Yard Products Inc. in producing Division 3's product are currently purchased from outside suppliers at a cost of $5.00 per unit. However, the same materials are available with Division 6. Division 6 has unused capacity and can produce the materials needed by Division 3 at a variable cost of $3.00 per unit. A transfer price of $3.20 per unit is established, and 40,000 units of material are transferred, with no reduction in Division 6's current sales.How much will Division 3's income from operations increase?
Chapter 11 Solutions
Managerial Accounting: The Cornerstone of Business Decision-Making
Ch. 11 - Discuss the differences between centralized and...Ch. 11 - Prob. 2DQCh. 11 - Explain why firms choose to decentralize.Ch. 11 - What are margin and turnover? Explain how these...Ch. 11 - What are the three benefits of ROI? Explain how...Ch. 11 - What is residual income? What is EVA? How does EVA...Ch. 11 - Can residual income or EVA ever be negative? What...Ch. 11 - What is transfer price?Ch. 11 - Prob. 9DQCh. 11 - (Appendix 11A) What is the Balanced Scorecard?
Ch. 11 - (Appendix 11A) Describe the four perspectives of...Ch. 11 - The practice of delegating authority to...Ch. 11 - Which of the following is not a reason for...Ch. 11 - A responsibility center in which a manager is...Ch. 11 - A responsibility center in which a manager is...Ch. 11 - If sales and average operating assets for Year 2...Ch. 11 - If sales and average operating assets for Year 2...Ch. 11 - The key difference between residual income and EVA...Ch. 11 - It ROI for a division is 15% and the company's...Ch. 11 - Prob. 9MCQCh. 11 - Prob. 10MCQCh. 11 - (Appendix 11A) Which of the following is a...Ch. 11 - (Appendix 11A) The length of time it takes to...Ch. 11 - Use the following information for Brief Exercises...Ch. 11 - Use the following information for Brief Exercises...Ch. 11 - Use the following information for Brief Exercises...Ch. 11 - Prob. 16BEACh. 11 - Use the following information for Brief Exercises...Ch. 11 - Use the following information for Brief Exercises...Ch. 11 - Use the following information for Brief Exercises...Ch. 11 - Use the following information for Brief Exercises...Ch. 11 - Prob. 21BEBCh. 11 - Calculating Transfer Price Teslum Inc. has a...Ch. 11 - Use the following information for Brief Exercises...Ch. 11 - Use the following information for Brief Exercises...Ch. 11 - Types of Responsibility Centers Consider each of...Ch. 11 - Margin, Turnover, Return on Investment Pelak...Ch. 11 - Margin, Turnover, Return on Investment, Average...Ch. 11 - Return on Investment, Margin, Turnover Data follow...Ch. 11 - Residual Income The Avila Division of Maldonado...Ch. 11 - Economic Value Added Falconer Company had net...Ch. 11 - Use the following information for Exercises 11-31...Ch. 11 - Use the following information for Exercises 11-31...Ch. 11 - Prob. 33ECh. 11 - Use the following information for Exercises 11-33...Ch. 11 - Prob. 35ECh. 11 - (Appendix 11A) Cycle Time and Velocity Prakesh...Ch. 11 - (Appendix 11A) Cycle Time and Velocity Lasker...Ch. 11 - (Appendix 11A) Manufacturing Cycle Efficiency...Ch. 11 - (Appendix 11A) Manufacturing Cycle Efficiency...Ch. 11 - Return on Investment and Investment Decisions...Ch. 11 - Return on Investment, Margin, Turnover Ready...Ch. 11 - Return on Investment for Multiple Investments,...Ch. 11 - Return on Investment and Economic Value Added...Ch. 11 - Transfer Pricing GreenWorld Inc. is a nursery...Ch. 11 - Prob. 45PCh. 11 - Prob. 46PCh. 11 - (Appendix 11A) Cycle Time, Velocity, Conversion...Ch. 11 - (Appendix 11A) Balanced Scorecard The following...Ch. 11 - (Appendix 11A) Cycle Time and Velocity,...Ch. 11 - Prob. 50C
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- Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $12. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the full-cost-based transfer price? • Variable cost per unit $6.69 Fixed cost per unit 1.47 . Division B sales price of Component X 14,50arrow_forwardCompany E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $12. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the market-based transfer price? • Variable cost per unit $10 • Fixed cost per unit 1.16 • Division B sales price of Component X 14.50arrow_forwardUse the following information for the next 2 questions (8 & 9). Division X produces and sells a product to external and internal customers. Per-unit information about its operations include: Selling price per unit to external customers $250 Variable manufacturing costs per unit 115 Fixed manufacturing overhead costs per unit 70 8. If X is operating at capacity and has unlimited external customer demand, what should be the minimum transfer price? 9. If X has sufficient excess capacity to meet internal demand, what should be the minimum transfer price?arrow_forward
- Edwards Company has two operating divisions, A and B. The following information is provided for Division A: Unit selling price $158 $108 $ 28 Unit variable costs Unit fixed costs Division B uses the type of product produced by Division A and has approached Division A about buying the product internally. Division B is currently paying $153 to purchase the product from an outside source. If Division A sells internally it can save $14.0 per unit in variable costs. Assuming that Division A has sufficient excess capacity to produce all of the units requested by Division B, which of the following is the lowest price Division A should consider for the transfer? Multiple Choice $94.00 $108.00 $153.00 $144.00arrow_forwardhello, please give more emphasis on points a,b,c, and d Spark Ltd has two divisions, assembly and electrical. The assembly division transfers partiallycompleted components to the electrical division at a predetermined transfer price. The assemblydivision’s standard variable production cost per unit is $550. This division has spare capacity, and itcould sell all its components to outside buyers at $680 per unit in a perfectly competitive market.Required:a) Determine a transfer price using the general rule.b) How would the transfer price change if the assembly division had no spare capacity? c) What transfer price would you recommend if there was no outside market for the transferredcomponent and the assembly division had spare capacity? d) Explain how negotiation between the supplying and buying units may be used to set transferprices. How does this relate to the general transfer pricing rule?arrow_forwardMaterials used by Angela Bread Company in producing Division A's product are currently purchased from outside suppliers at a cost of $30 per unit. However, the same materials are available from Division B. Division B has unused capacity and can produce the materials needed by Division A at a variable cost of $20 per unit. 1. Assuming transfer price of $25, how much would the income from operations of Division B increase? 2. If the negotiated price approach is used, what would be the range of acceptable transfer prices?arrow_forward
- What should the transfer price be and why?arrow_forwardpackman company has a division that manufactures a component that sells for $72 and has variable costs of $29 and fixed costs of $18. another division wants to purchase the component. what is the minimum transfer price if the division is operating at capacity? a. $72 b. $29 c. $47 d. $18arrow_forwardSandpiper Inc. has a division that manufactures a component that sells for $165 and has a variable cost of $45. Another division of the company wants to purchase the component Fixed cost per unit of the component is $20. What is the minimum transfer price if the division is operating at capacity? OA. $165 OB. $45 OC. $20 OD. $65arrow_forward
- answer in text form please (without image)arrow_forwardAssume a company has two divisions, Division A and Division B. Division A has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit (on the outside market) Variable cost per unit Fixed costs per unit (based on capacity) Capacity in units Division B could use Division A's product as a component part in the manufacture of 4,000 units of its own newly-designed product. Division B has received a quote of $58 from an outside supplier for a component part that is comparable to the one that Division A makes. If the company's divisional managers are evaluated based on their division's profits and Division A is currently selling 15,000 units on the outside market. what is Division B's highest acceptable transfer price if it were to buy 4,000 units from Division A? Multiple Choice $48 $52 $ 60 $ 44 $8 20,000 O $44 $58arrow_forwardDivision B wants to purchase a part from Division A. Division A's variable cost per unit is $18. Allocated fixed costs are $5 per unit. Division B can purchase the part from an outside supplier for $26 per unit. What is the highest transfer price per unit that Division B will be willing to pay?arrow_forward
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