9. The first division of Furrow Company produces part I that is used by OEN's as a key part in their products. Costs and sales data on Part I are as follows: P100 Selling price per unit Variable cost per unit Fixed cost per unit (* based on 40,000 units capacity per annum) 60 24* Furrow Company's second division is introducing a new product that will use Part1. An outside supplier has quoted second division a price of P96 per unit This the usual P100 price less a quantity discount due to the large number of second division's requirement. represents If the second division would buy 15,000 units of Part 1 from the first division, the effect on the corporate profits would be: Increase by P540,000. b. а. с. Increase by P210,000. Increase by P1,500,000 d. Reduced by P60,000. (грсра)

9. The first division of Furrow Company produces part I that is used by OEN's as a key part in their products. Costs and sales data on Part I are as follows: P100 Selling price per unit Variable cost per unit Fixed cost per unit (* based on 40,000 units capacity per annum) 60 24* Furrow Company's second division is introducing a new product that will use Part1. An outside supplier has quoted second division a price of P96 per unit This the usual P100 price less a quantity discount due to the large number of second division's requirement. represents If the second division would buy 15,000 units of Part 1 from the first division, the effect on the corporate profits would be: Increase by P540,000. b. а. с. Increase by P210,000. Increase by P1,500,000 d. Reduced by P60,000. (грсра)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $12. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the market-based transfer price? • Variable cost per unit $10 • Fixed cost per unit 1.16 • Division B sales price of Component X 14.50
Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $14. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost plus assuming 22% transfer price? • Variable cost per unit $6.71 • Fixed cost per unit 1.03 • Division B sales price of Component X 14.50
Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $14. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost plus assuming 22% transfer price? • Variable cost per unit $7.27 Fixed cost per unit 1.93 • Division B sales price of Component X 14.50
103.Nita Corp's Department 1 produced component C that is used by OZM as a key part. Production and sales data for component C is as follows: Selling price per unit Variable cost per unit Fixed cost per unit (based on 10,000 annual capacity) P100 36 24 Nita Corp.'s Department II is introducing a new product that will use component C. An outside supplier has quoted Department II a price of P96 per unit. This represents the usual P100 price less a quantity discount due to the large number of Department Il's requirements. The Company has transfer price formula of: Transfer price = Variable cost per unit + Lost contribution margin per unit on outside sales. Department I has enough excess capacity to handle all of Department Il's needs. For the overall interest of the company, Department I should (M) a. Sell to Department II at the same quoted price of P96 per unit. b. Sell to Department II at minimum price of P60 per unit. c. Not sell to Department II since it will lose P4 per unit. d.…
Collyer Products Inc. has a Valve Division that manufactures and sells a standard valve as follows: Capacity in units Selling price to outside customers on the intermediate market Variable costs per unit Fixed costs per unit (based on capacity) 10,000 15 8 5 The company has a Pump Division that could use this valve in the manufacture of one of its pumps. The Pump Division is currently purchasing 10,000 valves per year from an overseas supplier at a cost of $14 per valve. 3. Assume again that the Valve Division is selling all that it can produce to outside customers on the intermediate market. Also assume that $2 in variable expenses can be avoided on transfers within the company, due to reduced selling costs. What is the acceptable range, if any, for the transfer price between the two divisions? Transfer price 4. Assume the Pump Division needs 20,000 special high-pressure valves per year. The Valve Division's variable costs to manufacture and ship the special valve would be $10 per…
Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $12. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the full-cost-based transfer price? • Variable cost per unit $6.69 Fixed cost per unit 1.47 . Division B sales price of Component X 14,50
Division A produces a product that it sells to the outside market. It has compiled the following: Variable manufacturing cost per unit $9 Variable selling costs per unit $3 Total fixed manufacturing costs $144000 Total fixed selling costs $30000 Per unit selling price to outside buyers $42 Capacity in units per year 30000 Division B of the same company is currently buying an identical product from an outside provider for $39 per unit. It wishes to purchase 6000 units per year from Division A. Division A is currently selling 25000 units of the product per year. If the internal transfer is made, Division A will not incur any selling costs. What would be the minimum transfer price per unit that Division A would be willing to accept? $42.00 $9.00 $14.00 $13.00
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Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $13. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost-based transfer price? Variable cost per unit $6.31 Fixed cost per unit 1.36 Division B sales price of Component X 14.5
Division A produces a product that it sells to the outside market. It has compiled the following: Variable manufacturing cost per unit $8 Variable selling costs per unit $3 Total fixed manufacturing costs $164000 Total fixed selling costs $30000 Per unit selling price to outside buyers $56 Capacity in units per year 30000 Division B of the same company is currently buying an identical product from an outside provider for $54 per unit. It wishes to purchase 5200 units per year from Division A. Division A is currently selling 24800 units of the product per year. If the internal transfer is made, Division A will not incur any selling costs. What would be the maximum transfer price per unit that Division B would be willing to accept? $56 $9 $54 $8
Division X makes a part with the following characteristics: Production capacity.. 25,000 units $18 Selling price to outside customers. Variable cost per unit. $11 Fixed cost, total. $100,000 Division Y of the same company would like to purchase 10,000 units each period from Division X. Division Y now purchases the part from an outside supplier at a price of $17 each. Suppose that Division X is operating at capacity and can sell all of its output to outside customers. If Division X sells the parts to Division Y at $17 per unit, the company as a whole will be: Select one: a. better off by $10,000 each period. b. worse off by $20,000 each period. C. worse off by $10,000 each period. d. There will be no change in the status of the company as a whole.
(Appendix 11A) Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below: $40 $30 $10,000 20,000 Selling Price to Outside Customers Variable cost per Unit Total Fixed Costs Capacity in Units Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $38 per unit and would substitute the part made by Division A. Division B requires 5,000 units of the part each period. Division A has ample capacity to produce the units for Division B without any increase in fixed costs and without cutting into sales to outside customers. If Division A sells to Division B rather than to outside customers, the variable cost per unit would be $1 lower. What should be the lowest acceptable transfer price from the perspective of Division A? Multiple Choice $40. $30. $29.