Ayayai Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $10 from an outside vendor. Division A needs 12,400 lamps for the coming year. Division B has the capacity to manufacture 62,000 lamps annually. Sales to outside customers are estimated at 49,600 lamps for the next year. Reading lamps are sold at $12 each. Variable costs are $7 per lamp and include $3 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $99,200. Consider the following independent situations.
Ayayai Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $10 from an outside vendor. Division A needs 12,400 lamps for the coming year. Division B has the capacity to manufacture 62,000 lamps annually. Sales to outside customers are estimated at 49,600 lamps for the next year. Reading lamps are sold at $12 each. Variable costs are $7 per lamp and include $3 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $99,200. Consider the following independent situations.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing
Section: Chapter Questions
Problem 4CE
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