Accounting
27th Edition
ISBN: 9781337272094
Author: WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher: Cengage Learning,
expand_more
expand_more
format_list_bulleted
Question
Chapter 24, Problem 24.6BPR
(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.
(2)
To determine
The increase in S Division, NS Division, and Company E income from operations as a result of transfer pricing
(3)
To determine
To prepare: The income statements for S and NS Divisions of Company E for the year ended December 31, 20Y8
(4)
To determine
The increase in S Division, NS Division, and Company E 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
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
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:
(refer to pic)
2.
If the Commercial Division purchases 2,880 units from the Consumer Division, rather than externally, at a negotiated transfer price of $115 per unit, how much would the income from operations of each division and the total company income from operations increase?
3.
Prepare condensed divisional income statements for Garcon Inc. based on the data in Requirement 2.
4.
If a transfer price of $126 per unit is negotiated, how much would the income from operations of each division and the total company income from operations increase?
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:
(refer to pic)
The Consumer Division is presently producing 14,400 units out of a total capacity of 17,280 units. Materials used in producing the Commercial Division’s product are currently purchased from outside suppliers at a price of $150 per unit. The Consumer Division is able to produce the materials used by the Commercial Division. Except for the possible transfer of materials between divisions, no changes are expected in sales and expenses.
5A
What is the range of possible negotiated transfer prices that would be acceptable for Garcon Inc.?
5B
Assuming that the managers of the two divisions cannot agree on a transfer price, what price would you suggest as the transfer price?
Would the market price…
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…
Chapter 24 Solutions
Accounting
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...
Knowledge Booster
Similar questions
- 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) Operating income $147,360 $108,650…arrow_forwardBirrell Scientific Inc. manufactures electronic products, with two operating divisions, the GPS Systems and Communication Systems divisions. Condensed divisional income statements, which involve no intracompany transfers and which include a breakdown of expenses into variable and fixed components, are as follows: Birrell Scientific Inc.Divisional Income StatementsFor the Year Ended December 31, 20Y5 GPS SystemsDivision CommunicationSystems Division Total Sales: 75,000 units @ $60 per unit $4,500,000 $4,500,000 150,000 units @ $115 per unit $17,250,000 17,250,000 $4,500,000 $17,250,000 $21,750,000 Expenses: Variable: 75,000 units @ $40 per unit $(3,000,000) $(3,000,000) 150,000 units @ $90 per unit* $(13,500,000) (13,500,000) Fixed 250,000 (600,000) (850,000) Total expenses $(3,250,000) $(14,100,000)…arrow_forwardTransfer 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)…arrow_forward
- 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…arrow_forwardDecision on transfer pricing Materials used by the Instrument Division of XPort Industries are currently purchased from outside suppliers at a cost of $249 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $207 per unit. Assume that a transfer price of $237 has been established and that 25,200 units of materials are transferred, with no reduction in the Components Division’s current sales. a. How much would XPort Industries’ total income from operations increase?$fill in the blank 1 b. How much would the Instrument Division’s income from operations increase?$fill in the blank 2 c. How much would the Components Division’s income from operations increase?$fill in the blank 3 d. Any transfer price will cause the total income of the company to increase , as long as the supplier division capacity is used toward making…arrow_forwardGeneral Transfer Pricing Rule Scottsdale Manufacturing is organized into two divisions:Fabrication and Assembly. Components transferred between the two divisions are recorded at a predetermined transfer price. Standard variable manufacturing cost per unit in the Fabrication Divisionis $500. At the present time, this division is working to capacity. Fabrication estimates that the unitsit produces could be sold on the external market for $650. The product under consideration is viewedas a commodity-type product, with no differentiating features or characteristics.Required1. What roles are played by transfer prices? That is, why are transfer prices needed?2. Use the general transfer pricing rule presented in the chapter to determine an appropriate transfer price.Why is the amount you calculated considered an appropriate transfer price?3. What if the Fabrication Division had excess capacity? How would this change the indicated transferprice? Why is the amount you determined considered an…arrow_forward
- The condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as follows (assuming no support department allocations): The manager of the Consumer Products Division is considering ways to increase the return on investment. a. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that 143,750,000 of assets have been invested in the Consumer Products Division. b. If expenses could be reduced by 3,450,000 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on investment for the Consumer Products Division?arrow_forwardDecision on transfer pricing Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $375 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $311 per unit. Assume that a transfer price of $356 has been established and that 23,900 units of materials are transferred, with no reduction in the Components Division's current sales. a. How much would Ziegler Inc.'s total operating income increase? 770,000 X b. How much would the Instrument Division's operating income increase? 770,000 X How much would the Components Division's operating income increase? 770,000 X d. Any transfer price will cause the total income of the company to increase materials for products that are ultimately sold to the outside. X, as long as the supplier division capacity is used toward makingarrow_forwardDecision on Transfer Pricing Materials used by the Instrument Division of XPort Industries are currently purchased from outside suppliers at a cost of $193 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $160 per unit. a. If a transfer price of $176 per unit is established and 27,900 units of materials are transferred, with no reduction in the Components Division's current sales, how much would XPort Industries’ total income from operations increase?$fill in the blank 1 b. How much would the Instrument Division’s income from operations increase?$fill in the blank 2 c. How much would the Components Division's income from operations increase?$fill in the blank 3arrow_forward
- 1. Find minimum transfer price is transfer division has; a) excess capacity b) operates at full capacity 2. Find maximum transfer price system division would buy transistor from internal divisionarrow_forwardWhich method would you recommend that Ballantine Corporation use to allocate service-department costs? Why?arrow_forwardDecision on transfer pricing Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $447 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $371 per unit. Assume that a transfer price of $425 has been established and that 26,500 units of materials are transferred, with no reduction in the Components Division's current sales. a. How much would Ziegler Inc.'s total operating income increase? b. How much would the Instrument Division's operating income increase? C. How much would the Components Division's operating income increase? d. Any transfer price will cause the total income of the company to as long as the supplier division capacity is toward making materials for products that are ultimately sold to the outside.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
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,
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,