Accounting, Chapters 1-13
27th Edition
ISBN: 9781337272100
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Question
Chapter 24, Problem 24.6APR
(1)
To determine
Transfer price: The price charged for the goods and services transferred among the divisions is referred to as transfer price.
Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.
To indicate: If the market price be the appropriate transfer price for Company G
(2)
To determine
The increase in CR Division, CL Division, and Company G income from operations as a result of transfer pricing
(3)
To determine
To prepare: The income statements for CR and CL Divisions of Company G for the year ended December 31, 20Y8
(4)
To determine
The increase in CR Division, CL Division, and Company G income from operations as a result of transfer pricing
(5) (a)
To determine
The range of transfer price, if negotiated price approach is used
(b)
To determine
To suggest: The transfer price
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Transfer pricing
Garcon Inc. manufactures electronic products, with two operating divisions, Consumer and Commercial. Condensed divisional income statements, which involve no intracompany transfers and which include a breakdown of expenses into variable and fixed components, are as follows:
Garcon Inc.Divisional Income StatementsFor the Year Ended December 31, 20Y2
ConsumerDivision
Commercial Division
Total
Sales:
14,400 units × $144 per unit
$2,073,600
$2,073,600
21,600 units × $275 per unit
$5,940,000
5,940,000
Total sales
$2,073,600
$5,940,000
$8,013,600
Expenses:
Variable:
14,400 units × $104 per unit
$(1,497,600)
$(1,497,600)
21,600 units × $193* per unit
$(4,168,800)
(4,168,800)
Fixed
(200,000)
(520,000)
(720,000)
Total expenses
$(1,697,600)…
Transfer Pricing
Exoplex Industries Inc. is a diversified aerospace company, including two operating divisions, Semiconductors and Navigational Systems. Condensed divisional income statements, which involve no intracompany transfers and include a breakdown of expenses into variable and fixed components, are as follows:
Exoplex Industries Inc.Divisional Income StatementsFor the Year Ended December 31, 20Y8
SemiconductorsDivision
NavigationalSystemsDivision
Total
Sales:
2,240 units × $396 per unit
$887,040
$887,040
3,675 units × $590 per unit
$2,168,250
2,168,250
Total sales
$887,040
$2,168,250
$3,055,290
Expenses:
Variable:
2,240 units × $232 per unit
$519,680
$519,680
3,675 units × $472* per unit
$1,734,600
1,734,600
Fixed
220,000
325,000
545,000
Total expenses
$739,680
$2,059,600
$2,799,280
Income from operations
$147,360
$108,650
$256,010…
Garcon Inc. manufactures electronic products, with two operating divisions, Consumer and Com-
mercial. Condensed divisional income statements, which involve no intracompany transfers and
which include a breakdown of expenses into variable and fixed components, are as follows:
Garcon Inc.
Divisional Income Statements
For the Year Ended December 31, 20Y2
Consumer
Division
Commercial
Division
Total
Sales:
14,400 units x $144 per unit
$ 2,073,600
$ 2,073,600
21,600 units x $275 per unit
$ 5,940,000
5,940,000
$ 2,073,600
$ 5,940,000 $ 8,013,600
Total sales
Expenses:
Variable:
14,400 units x $104 per unit
$(1,497,600)
S(1,497,600)
21,600 units x $193" per unit
$(4,168,800)
(4,168,800)
Fixed
(200,000)
(520,000)
(720,000)
Total expenses
$(1,697,600) $(4,688,800) $(6,386,400)
$ 376,000
$ 1,251,200 $ 1,627,200
Operating income
*5150 ot the $193 per unit represents materials costs, and the remaining 543 per unit represents other
variable conversion expenses incurred within the Commercial…
Chapter 24 Solutions
Accounting, Chapters 1-13
Ch. 24 - Differentiate between centralized and...Ch. 24 - Differentiate between a profit center and an...Ch. 24 - Prob. 3DQCh. 24 - What is the major shortcoming of using income from...Ch. 24 - In a decentralized company in which the divisions...Ch. 24 - How does using the return on investment facilitate...Ch. 24 - Why would a firm use a balanced scorecard in...Ch. 24 - What is the objective of transfer pricing?Ch. 24 - When is the negotiated price approach preferred...Ch. 24 - When using the negotiated price approach to...
Ch. 24 - Budgetary performance for cost center Caroline...Ch. 24 - Budgetary performance for cost center Conley...Ch. 24 - Service department charges The centralized...Ch. 24 - Service department charges The centralized...Ch. 24 - Prob. 24.3APECh. 24 - Income from operations for profit center Using the...Ch. 24 - Profit margin, investment turnover, and ROI Cash...Ch. 24 - Profit margin, investment turnover and ROI Briggs...Ch. 24 - Residual income The Consumer Division of Galena...Ch. 24 - Residual income The Commercial Division of Herring...Ch. 24 - Transfer pricing The materials used by the North...Ch. 24 - Transfer pricing The materials used by the...Ch. 24 - Budget performance reports for cost centers...Ch. 24 - Divisional income statements The following data...Ch. 24 - Prob. 24.3EXCh. 24 - Prob. 24.4EXCh. 24 - Service department charges In divisional income...Ch. 24 - Service department charges and activity bases...Ch. 24 - Divisional income statements with service...Ch. 24 - Corrections to service department charges for a...Ch. 24 - Profit center responsibility reporting Glades...Ch. 24 - Return on investment The income from operations...Ch. 24 - Residual income Based on the data in Exercise...Ch. 24 - Determining missing items in return computation...Ch. 24 - Profit margin, investment turnover, and return on...Ch. 24 - Prob. 24.14EXCh. 24 - Determining missing items in return and residual...Ch. 24 - Determining missing items from computations Data...Ch. 24 - Prob. 24.17EXCh. 24 - Balanced scorecard for a service company American...Ch. 24 - Building a balanced scorecard Hit-n-Kun Inc. owns...Ch. 24 - Prob. 24.20EXCh. 24 - Prob. 24.21EXCh. 24 - Budget performance report for a cost center...Ch. 24 - Profit center responsibility reporting for a...Ch. 24 - Divisional income statements and return on...Ch. 24 - Effect of proposals on divisional performance A...Ch. 24 - Divisional performance analysis and evaluation The...Ch. 24 - Prob. 24.6APRCh. 24 - Budget performance report for a cost center The...Ch. 24 - Profit center responsibility reporting for a...Ch. 24 - Divisional income statements and return on...Ch. 24 - Effect of proposals on divisional performance A...Ch. 24 - Divisional performance analysis and evaluation The...Ch. 24 - Prob. 24.6BPRCh. 24 - Prob. 24.1CPCh. 24 - Prob. 24.3CPCh. 24 - Prob. 24.4CPCh. 24 - Evaluating divisional performance The three...Ch. 24 - Evaluating division performance Last Resort...
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