FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Assume you are the department B manager for Marley's Manufacturing. Marley's operates under a cost-based transfer structure. Assume you receive the majority of your raw
materials from department A, which sells only to department B (they have no outside sales).
The income statement for Marley's Manufacturing is shown below:
Marley's Manufacturing
Income Statement
Month Ending August 31, 2018
Dept. A
Dept. B
Sales
$23,000
$52,000
Cost of goods sold
11,040
27,560
Gross profit
$11,960
$24,440
Utility expenses
1,380
3,640
Wages expense
5,980
10,920
Costs allocated from corporate
2,530
15,080
Total expenses
$9,890
$29,640
Operating income/(loss) in dollars
$2,070
-$5,200
Operating income/(loss) in percentage
9 %
-10 %
Assume the market price for the items your department purchase is 15% below what you are being charged by department A of Marley's Manufacturing.
Determine the operating income for department B, assuming department A "sold" department B 1,000 units during the month and department A reduces the selling price to the
market price. Round your percentage answer to one decimal place.
New operating income/(loss) for department B in dollars
New operating income/(loss) for department B in percentage
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Transcribed Image Text:Assume you are the department B manager for Marley's Manufacturing. Marley's operates under a cost-based transfer structure. Assume you receive the majority of your raw materials from department A, which sells only to department B (they have no outside sales). The income statement for Marley's Manufacturing is shown below: Marley's Manufacturing Income Statement Month Ending August 31, 2018 Dept. A Dept. B Sales $23,000 $52,000 Cost of goods sold 11,040 27,560 Gross profit $11,960 $24,440 Utility expenses 1,380 3,640 Wages expense 5,980 10,920 Costs allocated from corporate 2,530 15,080 Total expenses $9,890 $29,640 Operating income/(loss) in dollars $2,070 -$5,200 Operating income/(loss) in percentage 9 % -10 % Assume the market price for the items your department purchase is 15% below what you are being charged by department A of Marley's Manufacturing. Determine the operating income for department B, assuming department A "sold" department B 1,000 units during the month and department A reduces the selling price to the market price. Round your percentage answer to one decimal place. New operating income/(loss) for department B in dollars New operating income/(loss) for department B in percentage
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