QS 22-19 (Algo) Determining transfer prices with excess capacity LO C1 The Windshield division of Jaguar Company makes windshields for use in its Assembly division. The Windshield division incurs variable costs of $296 per windshield and has capacity to make 590,000 windshields per year. The market price is $520 per windshield. The Windshield division incurs total fixed costs of $3,750,000 per year. If the Windshield division has excess capacity, what is the range of possible transfer prices that could be used on transfers between the Windshield and Assembly divisions? Transfer price per windshield will be at least but not more than

QS 22-19 (Algo) Determining transfer prices with excess capacity LO C1 The Windshield division of Jaguar Company makes windshields for use in its Assembly division. The Windshield division incurs variable costs of $296 per windshield and has capacity to make 590,000 windshields per year. The market price is $520 per windshield. The Windshield division incurs total fixed costs of $3,750,000 per year. If the Windshield division has excess capacity, what is the range of possible transfer prices that could be used on transfers between the Windshield and Assembly divisions? Transfer price per windshield will be at least but not more than

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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QUESTION 7 Quiet Corp. currently makes 2000 subcomponents a year in one of its factories. The unit costs to produce are: Description Per unit Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $4 4 2 IMI An outside supplier has offered to provide Quiet Corp. with the 2000 subcomponents at a $17 per unit price. Fixed overhead is not avoidable. If Quiet Corp. decides to buy from the outside supplier, the impact to net income will be ? If positive, enter the number, if negative, place a-sign before your number
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Exercise 11-7 (Algo) Transfer Pricing from the Viewpoint of the Entire Company (LO11-3] Division A manufactures electronic circuit boards that can be sold to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: Selling price per circuit board Variable cost per circuit board Number of circuit boards: Produced during the year Sold to outside customers Sold to Division B $ 189 $ 120 20,300 14,500 5,800 Sales to Division B were at the same price as sales to outside customers. The circuit boards purchased by Division B were used in an electronic instrument manufactured by that division (one board per instrument). Division B incurred $300 in additional variable cost per instrument and then sold the instruments for $690 each. Required: 1. Calculate the net operating incomes earned by Division A, Division B, and the company as a whole. 2. Assume Division A's manufacturing capacity is 20,300 circuit boards. Next year, Division B wants…
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Target Costing Laser Cast Inc. manufactures color laser printers. Model J20 presently sells for $150 and has a product cost of $120, as follows: Direct materials $90 Direct labor 20 Factory overhead 10 Total $120 It is estimated that the competitive selling price for color laser printers of this type will drop to $140 next year. Laser Cast has established a target cost to maintain its historical markup percentage on product cost. Engineers have provided the following cost-reduction ideas: 1. Purchase a plastic printer cover with snap-on assembly, rather than with screws. This will reduce the amount of direct labor by 9 minutes per unit. 2. Add an inspection step that will add six minutes per unit of direct labor but reduce the materials cost by $3 per unit. 3. Decrease the cycle time of the injection molding machine from four minutes to three minutes per part. Thirty percent of the direct labor and 42% of the factory overhead are related to running injection molding machines. The…
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7. Division X produces a single product for both Division Y and an external market. It has spare capacity to produce another 20,000 items. Additional details for Division X are as follows: Information for Division X Price of product sold to outside market Current transfer price Variable cost per item made in division Fixed costs per item (based on budget) Division Y has requested a further 5,000 items. £25 £20 £12 £6 What is the minimum price that Division X should ask per item? (a) £12 (b) £18 (c) £20 (d) £25
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