Crane Industries operates as a decentralized, vertically integrated, multidivisional company. One of its divisions, the systems division, manufactures scientific instruments and uses the products of two of the other divisions. The board division manufactures printed circuit boards (PCBs). It makes one PCB model exclusively for the systems division using proprietary designs and sells less complex models to outside markets. The transistor division sells its products in a well-developed competitive market and also to the systems division. The costs per unit of the two products the systems division uses are as follows: Direct material Direct labour Variable overhead Fixed overhead Total cost PCB $14.00 20.00 12.50 3.70 $50.20 Transistor $2.70 3.20 2.20 2.70 $10.80 The board division sells its commercial product at total cost plus a 25% markup and believes that the proprietary board it makes for the systems division would sell for $62.75 per unit on the open market. The market price of the transistor used by the systems division is $12.10 per unit.

Crane Industries operates as a decentralized, vertically integrated, multidivisional company. One of its divisions, the systems division, manufactures scientific instruments and uses the products of two of the other divisions. The board division manufactures printed circuit boards (PCBs). It makes one PCB model exclusively for the systems division using proprietary designs and sells less complex models to outside markets. The transistor division sells its products in a well-developed competitive market and also to the systems division. The costs per unit of the two products the systems division uses are as follows: Direct material Direct labour Variable overhead Fixed overhead Total cost PCB $14.00 20.00 12.50 3.70 $50.20 Transistor $2.70 3.20 2.20 2.70 $10.80 The board division sells its commercial product at total cost plus a 25% markup and believes that the proprietary board it makes for the systems division would sell for $62.75 per unit on the open market. The market price of the transistor used by the systems division is $12.10 per unit.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 1TIF

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