Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 22, Problem 22.37P
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: The contribution margin per direct-labor of selling X and D, the number of X and D that the semiconductor division should manufacture and sell and the division’s annual contribution margin.
B.
To determine
Whether the chips should be transferred to the process control division to replace circuit boards.
C.
To determine
The transfer price or the range of prices that would ensure goal congruency among the division managers.
D.
To determine
Whether the answer to the requirement C will be different if labor capacity in the S division were 60,000 hours instead of 55,000 hours.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Transfer pricing, utilization of capacity. (J. Patell, adapted) Sierra Inc. consists of a semiconductor division and a processcontrol division, each of which operates as an independent prot center. The semiconductor division employs craftsmen who produce two different electronic components: the new highperformance Xcel-chip and an older product called the Dcel-chip. These products have the following cost characteristics:
The Engine Division provides motors for the Auto Division of a Company. The standard unit costs for Engine Division are as follows:
Direct Materials 10,000Direct Labor 20,000Variable Overhead 5,000Fixed Overhead 2,500Market Price P 45,500
What is the best transfer price to avoid transfer price problems?
Value chain and classification of costs, computer company. Dell Computer incurs the following costs:a. Utility costs for the plant assembling the Latitude computer line of productsb. Distribution costs for shipping the Latitude line of products to a retail chainc. Payment to David Newbury Designs for design of the XPS 2-in-1 laptopd. Salary of computer scientist working on the next generation of serverse. Cost of Dell employees’ visit to a major customer to demonstrate Dell’s ability to interconnect withother computersf. Purchase of competitors’ products for testing against potential Dell productsg. Payment to business magazine for running Dell advertisementsh. Cost of cartridges purchased from outside supplier to be used with Dell printers
Chapter 22 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 22 - Prob. 22.1QCh. 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
Ch. 22 - Prob. 22.11QCh. 22 - Prob. 22.12QCh. 22 - Prob. 22.13QCh. 22 - Under the general guideline for transfer pricing,...Ch. 22 - How should managers consider income tax issues...Ch. 22 - Evaluating management control systems, balanced...Ch. 22 - Cost centers, profit centers, decentralization,...Ch. 22 - Prob. 22.18ECh. 22 - Prob. 22.19ECh. 22 - Multinational transfer pricing, effect of...Ch. 22 - Prob. 22.21ECh. 22 - Multinational transfer pricing, global tax...Ch. 22 - Prob. 22.23ECh. 22 - Prob. 22.24ECh. 22 - Transfer-pricing problem (continuation of 22-24)....Ch. 22 - Prob. 22.26PCh. 22 - Prob. 22.27PCh. 22 - Effect of alternative transfer-pricing methods on...Ch. 22 - Goal-congruence problems with cost-plus...Ch. 22 - Multinational transfer pricing, global tax...Ch. 22 - Transfer pricing, external market, goal...Ch. 22 - Prob. 22.32PCh. 22 - Transfer pricing, goal congruence, ethics. Cocoa...Ch. 22 - Prob. 22.34PCh. 22 - Transfer pricing, perfect and imperfect markets....Ch. 22 - Prob. 22.36PCh. 22 - Prob. 22.37P
Knowledge Booster
Similar questions
- Evans, Inc., has a unit-based costing system. Evanss Miami plant produces 10 different electronic products. The demand for each product is about the same. Although they differ in complexity, each product uses about the same labor time and materials. The plant has used direct labor hours for years to assign overhead to products. To help design engineers understand the assumed cost relationships, the Cost Accounting Department developed the following cost equation. (The equation describes the relationship between total manufacturing costs and direct labor hours; the equation is supported by a coefficient of determination of 60 percent.) Y=5,000,000+30X,whereX=directlaborhours The variable rate of 30 is broken down as follows: Because of competitive pressures, product engineering was given the charge to redesign products to reduce the total cost of manufacturing. Using the above cost relationships, product engineering adopted the strategy of redesigning to reduce direct labor content. As each design was completed, an engineering change order was cut, triggering a series of events such as design approval, vendor selection, bill of materials update, redrawing of schematic, test runs, changes in setup procedures, development of new inspection procedures, and so on. After one year of design changes, the normal volume of direct labor was reduced from 250,000 hours to 200,000 hours, with the same number of products being produced. Although each product differs in its labor content, the redesign efforts reduced the labor content for all products. On average, the labor content per unit of product dropped from 1.25 hours per unit to one hour per unit. Fixed overhead, however, increased from 5,000,000 to 6,600,000 per year. Suppose that a consultant was hired to explain the increase in fixed overhead costs. The consultants study revealed that the 30 per hour rate captured the unit-level variable costs; however, the cost behavior of other activities was quite different. For example, setting up equipment is a step-fixed cost, where each step is 2,000 setup hours, costing 90,000. The study also revealed that the cost of receiving goods is a function of the number of different components. This activity has a variable cost of 2,000 per component type and a fixed cost that follows a step-cost pattern. The step is defined by 20 components with a cost of 50,000 per step. Assume also that the consultant indicated that the design adopted by the engineers increased the demand for setups from 20,000 setup hours to 40,000 setup hours and the number of different components from 100 to 250. The demand for other non-unit-level activities remained unchanged. The consultant also recommended that management take a look at a rejected design for its products. This rejected design increased direct labor content from 250,000 hours to 260,000 hours, decreased the demand for setups from 20,000 hours to 10,000 hours, and decreased the demand for purchasing from 100 component types to 75 component types, while the demand for all other activities remained unchanged. Required: 1. Using normal volume, compute the manufacturing cost per labor hour before the year of design changes. What is the cost per unit of an average product? 2. Using normal volume after the one year of design changes, compute the manufacturing cost per hour. What is the cost per unit of an average product? 3. Before considering the consultants study, what do you think is the most likely explanation for the failure of the design changes to reduce manufacturing costs? Now use the information from the consultants study to explain the increase in the average cost per unit of product. What changes would you suggest to improve Evanss efforts to reduce costs? 4. Explain why the consultant recommended a second look at a rejected design. Provide computational support. What does this tell you about the strategic importance of cost management?arrow_forwardPlease help me with the attached question thank youarrow_forwardFlash E Card Manufacturing manufactures software parts for the computer software systems that produce e -cards. The Flash II part is currently manufactured in the Computer Department. The Data Department also produces the part and the plant has excess capacity to produce the Flash ll part. The current market price of the Flash Il part is $500. The managerial accountant reported the following manufacturing costs and variable expense data: Flash E-Card Manufacturing Manufacturing Costs and Variable Expense Report Flash Component Direct materials $800 $170 Direct labor $110 Variable manufacturing overhead Fixed manufacturing overhead (current production level) Variable selling expenses (only incurred on sales to outside consumers) $125 $140 If the highest acceptable transfer price is $500 in the market, what is the lowest acceptable in house price the Data Department should receive to produce the part in house at the Computer Department? O A. $1,080 О В. $800 О С. $170 O D. $110arrow_forward
- Ringsmitharrow_forwardRequired information [The following information applies to the questions displayed below.] Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the following seven activity cost pools: Activity Cost Pool Labor-related Machine-related Machine setups Production orders Product testing Packaging General factory Activity Cost Pool Labor-related Machine-related Estimated Overhead Cost $ 52,000 $ 15,000 $ 42,000 $ 18,000 Machine setups Production orders Product testing Packaging General factory $ 48,000 $ 75,000 $ 108,800 Required: 1. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Rate per DLH per MH per setup per order per test per package per DLH Expected Activity 8,000 direct labor-hours 20,000 machine-hours 1,000 setups 500 orders 2,090 tests 5,90 packages 8,000 direct labor-hoursarrow_forwardFlash E−Card Manufacturing manufactures software parts for the computer software systems that produce e−cards. The Flash II part is currently manufactured in the Computer Department. The Data Department also produces the part, and the plant has excess capacity to produce the Flash II part. The current market price of the Flash II part is $900. The managerial accountant reported the following manufacturing costs and variable expense data: Flash E−Card Manufacturing Manufacturing Costs and Variable Expense Report Flash Component Direct materials $860 Direct labor $110 Variable manufacturing overhead $150 Fixed manufacturing overhead (current production level) $145 Variable selling expenses (only incurred on sales to outside consumers) $118 If the highest acceptable transfer price is $900 in the market, what is the lowest acceptable in−house price the Data Department should receive to produce the part in−house at the ComputerDepartment?arrow_forward
- Absorption costing is a widely used accounting method for costing and reporting on the total production cost of goods or services within an organization. It involves allocating both variable and fixed manufacturing costs to the cost of products. With that in mind, consider the following scenario: ABC Manufacturing Company produces electronic gadgets. In a given accounting period, the company manufactured and sold 10,000 units of their flagship gadget. The following data is available: Direct materials cost per unit: $50 Direct labor cost per unit: $30 Variable manufacturing overhead cost per unit: $20 Fixed manufacturing overhead cost for the period: $50,000 Selling and administrative expenses (all fixed): $30,000 Selling price per gadget: $200 Using absorption costing, calculate the following: A. The total manufacturing cost per unit of the electronic gadget. B. The total cost of goods manufactured during the accounting period. C. The ending inventory value of the manufactured gadgets.…arrow_forwarda) Calculate net advantage of buying the part from the external supplier. b) Should the offer be accepted or should Elric continue to produce the product in house?arrow_forwardAlpha Technology produces two products: a high-end laptop under the label Excellent Laptops and an inexpensive desktop under the label Outstanding Computers. The two products use two overhead activities, with the following costs: Setting up equipment $3,000 Machining $15,000 The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production. Excellent Laptops Outstanding Computers Direct labor $25,000 $10,000 Direct materials $20,000 $5,000 Expected production in units 3,000 3,000 Machine hours 850 2,000 Setup hours 80 75 Calculate the overhead cost per unit for Excellent Laptops using a plantwide rate based on direct labor costs. (Note: Round the overhead rateto two decimal places; round the final answer to two decimal places.)arrow_forward
- Using the following information for question 8-10 Honeydew Company produces two products, a high-end laptop computer under the label Bunsen Laptops, and an inexpensive desktop computer under the label Beaker Computers. The two products use two overhead activities, with the following costs: Setting up equipment Machining $2,000 12,000 The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production. Direct Labor Direct Materials Expected Production in Units Machine hours Setup hours 8. Calculate Beaker's consumption ratio for setup hours. a. 0.50 b. 0.45 c. 0.90 d. 0.25 Bunsen Beaker $20,000 $5,000 15,000 4,000 2,000 2,000 750 1,500 50 50arrow_forwardKeyboard uses activity-based costing. Two of Keyboard's production activities are kitting (assembling the raw materials needed for each computer in one kit) and boxing the completed products for shipment to customers. Assume that Keyboard spends $10,000,000per month on kitting and $18,000,000 per month on boxing.Keyboardallocates the following: •Kitting costs based on the number of parts used in the computer •Boxing costs based on the cubic feet of space the computer requires Suppose Keyboard estimates it will use 250,000,000 parts per month and ship products with a total volume of 22,500,000 cubic feet per month. Assume that each desktop computer requires 175 parts and has a volume of 7 cubic feet. The predetermined overhead allocation rate for kitting is $0.04 per part and the predetermined overhead allocation rate for boxing is $0.80 per cubic foot. What are the kitting and boxing costs assigned to one desktop computer?arrow_forward! Required information [The following information applies to the questions displayed below.] Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the following seven activity cost pools: Activity Cost Pool Labor-related Machine-related Machine setups Production orders Product testing Packaging General factory Estimated Overhead Cost $ 29,200 $7,000 $ 18,000 $ 24,000 $ 24,000 $ 47,600 $ 59,600 Predetermined overhead rate Expected Activity 4,000 direct labor-hours 7,000 machine-hours per DLH 500 setups 500 orders 2. Compute the company's predetermined overhead rate, assuming that the company uses a single plantwide predetermined overhead rate based on direct labor-hours. (Round your answer to 2 decimal places.) 1,200 tests 3,400 packages 4,000 direct labor-hoursarrow_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
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Principles of Cost Accounting
Accounting
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Cengage Learning