Lola Metals has two decentralized divisions, Stamping and Finishing. Finishing always has purchased certain units from Stamping at $52 per unit. Stamping plans to raise the price to $64 per unit, the price it receives from outside customers. As a result, Finishing is considering buying these units from outside suppliers for $52 per unit. Corporate policy allows division managers to choose both customers and suppliers regardless of the transfer price. Stamping's costs follow: Variable costs per unit Annual fixed costs Annual production of these units sold to Alpha $ 50 $ 63,200 30, 200 units Required: a. If Finishing buys from an outside supplier, the facilities that Stamping uses to produce these units will remain idle. What will be the impact on corporate profits if Lola Metals enforces a transfer price of $64 per unit between Stamping and Finishing? b. Suppose Lola Metals enforces a transfer price of $52 and insists that Stamping sell to Finishing before selling to outside customers. Stamping currently operates at capacity and can easily sell on the outside market the units it sells to Finishing. What cost will Lola Metals incur as a result of this policy?

Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $332 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 $276 per unit.   A. If a transfer price of $302 per unit is established and 28,900 units of materials are transferred, with no reduction in the Components Division's current sales, 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 Component Division's operating income increase?

Suppose there is no external market for Ranbax. What quantity of Ranbax should the Letang Company produce to maximize overall income? How should this quantity be allocated between the two processing divisions?

Solomon Company has two divisions, A and B. Division A manufactures 6,600 units of product per month. The cost per unit is calculated as follows. Variable costs Fixed costs Total cost $ 6.70 19.20 $ 25.90 Division B uses the product created by Division A. No outside market for Division A's product exists. The fixed costs incurred by Division A are allocated using headquarters-level facility-sustaining costs. The manager of Division A suggests that the product be transferred to Division B at a price of at least $25.90 per unit. The manager of Division B argues that the same product can be purchased from another company for $18.30 per unit and requests permission to do so. Required 6-1. How much would Solomon gain or lose per unit if Division B were to purchase the product from the outside company for $18.30 per unit? Note: Round your answer to 2 decimal places. 6-2. Is it in the best interest of Solomon Company for Division B to purchase the product from an outside company? a-1.…

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DK manufactures three products, W, X and Y. Each product uses the same materials and the same type of direct labour but in different quantities. The company currently uses a cost plus basis to determine the selling price of its products. This is based on full cost using an overhead absorption rate per direct labour hour. However, the managing director is concerned that the company may be losing sales because of its approach to setting prices. He thinks that a marginal costing approach may be more appropriate, particularly since the workforce is guaranteed a minimum weekly wage and has a three month notice period. Required: a) Given the managing director's concern about DK's approach to setting selling prices, discuss the advantages and disadvantages of marginal cost plus pricing AND total cost-plus pricing. The direct costs of the three products are shown below: Product W Y Budgeted annual production (units) 15,000 24,000 20,000 $ per unit $ per unit $ per unit Direct materials 35 40…

Carol Components operates a Production Division and a Packaging Division. Both divisions are evaluated as profit centers. Packaging buys components from Production and assembles them for sale. Production sells many components to third parties in addition to Packaging. Selected data from the two operations follow: Capacity (units) Sales pricea Variable costs b Fixed costs Production 50,600 $ 252 $ 108 $ 30,000,000 a For Production, this is the price to third parties. b For Packaging, this does not include the transfer price paid to Production. Packaging 25,300 $ 792 $ 300 $ 18,000,000 Suppose Production is located in Country A with a tax rate of 30 percent and Distribution in Country B with a tax rate of 10 percent. All other facts remain the same. a. Optimal transfer price b. Transfer price c. Transfer price Required: a. Current output in Production is 25,300 units. Packaging requests an additional 5,960 units to produce a special order. What transfer price would you recommend? b.…

Bella Brands operates with two divisions, Aftershave and Deodorant. The Aftershave Division produces a chemical that the Deodorant Division also uses. The Aftershave Division also sells this chemical to other firms for $10 per ounce. The cost information for the Aftershave Division is as follows:          Variable costs per ounce $ 6.00   Fixed costs per ounce $ 15.00   Monthly production capacity   30,000 ounces   If the Aftershave Division is not operating at full capacity and is able to supply the Deodorant Division with its needs for the chemical, what is the minimum transfer price that the Aftershave Division will accept?   Multiple Choice   $3.00 per ounce   None of these.   $6.00 per ounce   $15.00 per ounce   $10.00 per ounce

Gibson Motors manufactures specialty tractors. It has two divisions: a Tractor Division and a Tire Division. The Tractor Division can use the tires produced by the Tire Division. The market price per tire is $75. The Tire Division has the following costs per tire: i (Click the icon to view the costs and additional information.) Read the requirements. Requirement 1. Assume that the Tire Division has excess capacity, meaning that it can produce tires for the Tractor Division without giving up any of its current tire sales to outsiders. If Gibson Motors has a negotiated transfer price policy, what is the lowest acceptable transfer price? What is the highest acceptable transfer price? (Assume the $1 includes only the variable portion of conversion costs.) The lowest acceptable transfer price is the Tire Division's Requirements 1. Assume that the Tire Division has excess capacity, meaning that it can produce tires for the Tractor Division without giving up any of its current tire sales to…

Decision on Transfer Pricing Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $1,350 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 $900 per unit. Assume that a transfer price of $1,200 has been established and that 75,000 units of materials are transferred, with no reduction in the Components Division's current sales. a.  How much would Ziegler Inc.'s total operating income increase?$fill in the blank 1 b.  How much would the Instrument Division's operating income increase?$fill in the blank 2 c.  How much would the Components Division's operating income increase?$fill in the blank 3 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…