Transfer Pricing: This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization. To determine: Whether transfers should be made in division B if there is no unused capacity in division A and whether the market price is the correct transfer price.

Question

Palladium, Incorporated recently lost a portion of its records in an office fire. The following information was salvaged from the accounting records. Cost of Goods Sold $ 67,000 Work-in-Process Inventory, Beginning 11,300 Work-in-Process Inventory, Ending 9,400 Selling and Administrative Expense 16,000 Finished Goods Inventory, Ending 16,100 Finished Goods Inventory, Beginning ?question mark Direct Materials Used ?question mark Factory Overhead Applied 12,400 Operating Income 14,220 Direct Materials Inventory, Beginning 11,180 Direct Materials Inventory, Ending 6,140 Cost of Goods Manufactured 61,880 Direct labor cost incurred during the period amounted to 1.5 times the factory overhead. The Chief Financial Officer of Palladium, Incorporated has asked you to recalculate the following accounts and to report to him by the end of the day. What is the amount in the finished goods inventory at the beginning of the year?

Answer 1

Question

Chapter 22, Problem 22.27P

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: Whether transfers should be made in division B if there is no unused capacity in division A and whether the market price is the correct transfer price.

B.

To determine

Whether the 800 units should be transferred to division A and at what transfer price.

C.

To determine

The contribution to the company as a whole if the transfer were made and as a manager whether buying can be done at $110.

D.

To determine

The transfer price that would produce the same operating income for division A for the two options (a) cutting the external price to $156, with the certainty that the sale will rise to 2,000 units and (b) maintaining the external price of $160 for the 1,200 units and transferring the 800 units to division B at a price that would produce the same operating income.

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Palladium, Incorporated recently lost a portion of its records in an office fire. The following information was salvaged from the accounting records. Cost of Goods Sold $ 67,000 Work-in-Process Inventory, Beginning 11,300 Work-in-Process Inventory, Ending 9,400 Selling and Administrative Expense 16,000 Finished Goods Inventory, Ending 16,100 Finished Goods Inventory, Beginning ?question mark Direct Materials Used ?question mark Factory Overhead Applied 12,400 Operating Income 14,220 Direct Materials Inventory, Beginning 11,180 Direct Materials Inventory, Ending 6,140 Cost of Goods Manufactured 61,880 Direct labor cost incurred during the period amounted to 1.5 times the factory overhead. The Chief Financial Officer of Palladium, Incorporated has asked you to recalculate the following accounts and to report to him by the end of the day. What is the amount in the finished goods inventory at the beginning of the year?

Which of the following statements is incorrect regarding manufacturing overhead? Multiple Choice Manufacturing overhead includes both fixed and variable costs. Manufacturing overhead is an indirect cost to units or products. Actual overhead costs are used in the cost accounting process. Actual overhead costs tend to remain relatively constant over various output levels.

Palladium, Incorporated recently lost a portion of its records in an office fire. The following information was salvaged from the accounting records. Cost of Goods Sold $ 72,500 Work-in-Process Inventory, Beginning 13,500 Work-in-Process Inventory, Ending 10,500 Selling and Administrative Expense 18,750 Finished Goods Inventory, Ending 19,125 Finished Goods Inventory, Beginning ?question mark Direct Materials Used ?question mark Factory Overhead Applied 13,500 Operating Income 14,825 Direct Materials Inventory, Beginning 11,675 Direct Materials Inventory, Ending 6,525 Cost of Goods Manufactured 67,050 Direct labor cost incurred during the period amounted to 1.5 times the factory overhead. The Chief Financial Officer of Palladium, Incorporated has asked you to recalculate the following accounts and to report to him by the end of the day. What is the amount of direct materials purchased?

Answer 2

Question

Chapter 22, Problem 22.27P

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: Whether transfers should be made in division B if there is no unused capacity in division A and whether the market price is the correct transfer price.

B.

To determine

Whether the 800 units should be transferred to division A and at what transfer price.

C.

To determine

The contribution to the company as a whole if the transfer were made and as a manager whether buying can be done at $110.

D.

To determine

The transfer price that would produce the same operating income for division A for the two options (a) cutting the external price to $156, with the certainty that the sale will rise to 2,000 units and (b) maintaining the external price of $160 for the 1,200 units and transferring the 800 units to division B at a price that would produce the same operating income.

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Answer 3

Question

Chapter 22, Problem 22.27P

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: Whether transfers should be made in division B if there is no unused capacity in division A and whether the market price is the correct transfer price.

B.

To determine

Whether the 800 units should be transferred to division A and at what transfer price.

C.

To determine

The contribution to the company as a whole if the transfer were made and as a manager whether buying can be done at $110.

D.

To determine

The transfer price that would produce the same operating income for division A for the two options (a) cutting the external price to $156, with the certainty that the sale will rise to 2,000 units and (b) maintaining the external price of $160 for the 1,200 units and transferring the 800 units to division B at a price that would produce the same operating income.

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Answer 4

Question

Chapter 22, Problem 22.27P

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: Whether transfers should be made in division B if there is no unused capacity in division A and whether the market price is the correct transfer price.

B.

To determine

Whether the 800 units should be transferred to division A and at what transfer price.

C.

To determine

The contribution to the company as a whole if the transfer were made and as a manager whether buying can be done at $110.

D.

To determine

The transfer price that would produce the same operating income for division A for the two options (a) cutting the external price to $156, with the certainty that the sale will rise to 2,000 units and (b) maintaining the external price of $160 for the 1,200 units and transferring the 800 units to division B at a price that would produce the same operating income.

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Answer 5

Chapter 22, Problem 22.27P

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: Whether transfers should be made in division B if there is no unused capacity in division A and whether the market price is the correct transfer price.

B.

To determine

Whether the 800 units should be transferred to division A and at what transfer price.

C.

To determine

The contribution to the company as a whole if the transfer were made and as a manager whether buying can be done at $110.

D.

To determine

The transfer price that would produce the same operating income for division A for the two options (a) cutting the external price to $156, with the certainty that the sale will rise to 2,000 units and (b) maintaining the external price of $160 for the 1,200 units and transferring the 800 units to division B at a price that would produce the same operating income.

Answer 6

Chapter 22, Problem 22.27P

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: Whether transfers should be made in division B if there is no unused capacity in division A and whether the market price is the correct transfer price.

Answer 7

Chapter 22, Problem 22.27P

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: Whether transfers should be made in division B if there is no unused capacity in division A and whether the market price is the correct transfer price.

Answer 8

B.

To determine

Whether the 800 units should be transferred to division A and at what transfer price.

Answer 9

B.

To determine

Whether the 800 units should be transferred to division A and at what transfer price.

Answer 10

C.

To determine

The contribution to the company as a whole if the transfer were made and as a manager whether buying can be done at $110.

Answer 11

C.

To determine

The contribution to the company as a whole if the transfer were made and as a manager whether buying can be done at $110.

Answer 12

D.

To determine

The transfer price that would produce the same operating income for division A for the two options (a) cutting the external price to $156, with the certainty that the sale will rise to 2,000 units and (b) maintaining the external price of $160 for the 1,200 units and transferring the 800 units to division B at a price that would produce the same operating income.

Answer 13

D.

To determine

The transfer price that would produce the same operating income for division A for the two options (a) cutting the external price to $156, with the certainty that the sale will rise to 2,000 units and (b) maintaining the external price of $160 for the 1,200 units and transferring the 800 units to division B at a price that would produce the same operating income.

Answer 14

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Ch. 22 - Prob. 22.1Q Ch. 22 - Describe three criteria you would use to evaluate...Ch. 22 - What is the relationship among motivation, goal...Ch. 22 - Name three benefits and two costs of...Ch. 22 - Organizations typically adopt a consistent...Ch. 22 - Transfer pricing is confined to profit centers. Do...Ch. 22 - What are the three methods for determining...Ch. 22 - What properties should transfer-pricing systems...Ch. 22 - All transfer-pricing methods give the same...Ch. 22 - Prob. 22.10Q

Solution Summary: The author explains how to calculate the contribution margin per unit of A and B.

Whether the 800 units should be transferred to division A and at what transfer price.

The contribution to the company as a whole if the transfer were made and as a manager whether buying can be done at $110.

Chapter 22 Solutions