Selling price per unit (on the outside market) $ 75 Variable cost per unit $ 59 Fixed costs per unit (based on capacity) $ 4 Capacity in units 20,000 Division B could use Division A’s product as a component part in the manufacture of 4,000 units of its own newly-designed product. Division B has received a quote of $58 from an outside supplier for a component part that is comparable to the one that Division A makes. If that the
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Assume a company has two divisions, Division A and Division B. Division A has provided the following information regarding the one product that it manufactures and sells on the outside market:
| Selling price per unit (on the outside market) | $ 75 |
|---|---|
| Variable cost per unit | $ 59 |
| Fixed costs per unit (based on capacity) | $ 4 |
| Capacity in units | 20,000 |
Division B could use Division A’s product as a component part in the manufacture of 4,000 units of its own newly-designed product. Division B has received a quote of $58 from an outside supplier for a component part that is comparable to the one that Division A makes.
If that the company’s divisional managers are evaluated based their division’s profits and Division A is currently selling 20,000 units on the outside market, what is lowest acceptable transfer price for Division A if it were to sell 4,000 units to Division B?
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$79
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$75
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$73
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$71
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- Assume a company has two divisions, Division A and Division B. Division A has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit (on the outside market) Variable cost per unit Fixed costs per unit (based on capacity) Capacity in units Division B could use Division A's product as a component part in the manufacture of 4,000 units of its own newly-designed product. Division B has received a quote of $58 from an outside supplier for a component part that is comparable to the one that Division A makes. If the company's divisional managers are evaluated based on their division's profits and Division A is currently selling 15,000 units on the outside market. what is Division B's highest acceptable transfer price if it were to buy 4,000 units from Division A? Multiple Choice $48 $52 $ 60 $ 44 $8 20,000 O $44 $58Assume a company has two divisions, Division A and Division B. Division A has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit (on the outside market) $ 60 Variable cost per unit $ 43 Fixed costs per unit (based on capacity) $ 8 Capacity in units 20,000 Division B could use Division A’s product as a component part in the manufacture of 4,000 units of its own newly-designed product. Division B has received a quote of $60 from an outside supplier for a component part that is comparable to the one that Division A makes. Also assume that the company’s divisional managers are evaluated based on their division’s profits and that Division A is currently selling 17,000 units on the outside market. If the managers of the two divisions do not agree on a transfer price and Division B purchases 4,000 component parts from an outside supplier, what would be the effect on the company’s profits?Assume a company has two divisions, Division B and Division C. Division B has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit (on the outside market) $ 60 Variable cost per unit $ 44 Fixed costs per unit (based on capacity) $ 8 Capacity in units 20,000 Division C could use Division B’s product as a component part in the manufacture of 4,000 units of its own newly-designed product. Division C has received a quote of $58 from an outside supplier for a component part that is comparable to the one that Division B makes. If the company’s divisional managers are evaluated based on their division’s profits and Division B is currently selling 15,000 units on the outside market, what is Division C’s highest acceptable transfer price if it were to buy 4,000 units from Division B? Multiple Choice $48 $52 $44 $58
- Assume Division A has provided the following information regarding the one product that it manufactures and sells on the outside market Selling price per unit (on the outside market) Variable cost per unit Fixed costs per unit (based on capacity) Capacity in units $ 100 $ 60 $ 6 30,000 Division A has been offered the opportunity to sell 5,000 units of its only product to another division within the same company. The other division can either agree to a transfer price with Division A or purchase a comparable product on the outside market for $100. If Division A is currently selling 27,500 units on the outside market and the other division chooses to buy 5,000 units on the outside market (rather than agreeing to a transfer price with Division A), what is the impact on profits for the company as a whole? Multiple Choice O Profits would decrease by $100,000 Profite unnin darrasco h $70.000Division A of SLG Company produces a part it sells to other companies. Sales and cost data for the part are as follows: Capacity in units 60,000 units Selling price per unit O $27 per unit O $39 per unit O $36 per unit O $41 per unit Variable cost per unit O None of the above. Fixed cost per unit at capacity Division B, another division of SLG Company, would like to buy this part from Division A. Division B is currently purchasing the part from an outside source at $38 per unit. If Division A sells to Division B, then $1 in Division A's variable costs can be avoided. Assume Division A has enough idle capacity to handle all of Division B's needs without any increase in fixed costs and without interfering with outside sales. According to the transfer pricing guidelines, what is the lowest acceptable transfer price from the perspective of Division A? $40 per unit $28 per unit $9 per unitAssume a company has two divisions, Division D and Division E. Division D has provided the following information regarding the one product that it manufactures and sells on the outside market Selling pr por unit (on the outside market) Variable co.. per unit Fixed costs per unit (based on capacity) Capacity in units $ 60 $ 44 $8 20,000 Division E could use Division D's product as a component part in the manufacture of 4,000 units of its own newly-designed product Division E has received a quote of $58 from an outside supplier for a component part that is comparable to the one that Division D makes If the company's divisional managers are evaluated based on their division's profits and Division D is currently selling 15,000 units on the outside market. what is Division D's lowest acceptable transfer price if it were to sell 4,000 units to Division E?
- Assume a company has two divisions, Division C and Division D. Division C has provided the following information regarding the one product that it manufactures and sells on the outside market: Selling price per unit (on the outside market) $ 60 Variable cost per unit $ 44 Fixed costs per unit (based on capacity) $ 8 Capacity in units 20,000 Division D could use Division C’s product as a component part in the manufacture of 4,000 units of its own newly-designed product. Division D has received a quote of $58 from an outside supplier for a component part that is comparable to the one that Division C makes. If the company’s divisional managers are evaluated based on their division’s profits and Division C is currently selling 15,000 units on the outside market, what is Division C’s lowest acceptable transfer price if it were to sell 4,000 units to Division D?2. Division A makes a part that is sells to customers outside of the company. Data concerning this appear as follows: Sales (100,000 units) P800,000 Direct material 2 Direct labor 2 Variable Overhead 1 Variable Selling &Admin 0. 20 Fixed overhead 0.10 Fixed selling &admin 0.05 If Division B purchase the part to Division A, how much is the transfer price if the basis is: a. Variable Cost b. Full production cost c. Variable Cost + markup of 50% d. Market priceKing Company has two divisions whose most recent financial statements are shown below: Residential Division Commercial Division 5,340 $417,000 Unit sales Sales Less: cost of goods sold: Unit-level production costs Depreciation, production equipment Gross margin Less: operating expenses: Unit-level selling and administrative Corporate-level facility costs (fixed) Net income (loss) Unit sales Sales Less: cost of goods sold: Unit-level production costs Depreciation, production equipment Required: a. Compute the impact on profit if the Residential Division is eliminated. Gross margin Less: operating expenses: Unit-level selling and administrative Corporate-level facility costs (fixed) Net income (loss) 176,700 83,500 $156,800 Commercial Division Yes No 41,700 21,000 $94, 100 b. Do you recommend that King eliminate the Residential Division? 1,340 $117,000 61,700 33,500 $21,800 11,700 16,000 $(5,900)
- Question 2: How much of each product should be produced to maximize net operating income? Holton Company makes three products in a single facility. Data concerning these products follow: Product A Product B Product C Selling Price per Unit $95.80 74.90 113.40 Direct Materials $41.80 $41.80 $68.20 Direct Labor $30.10 $13.40 $17.20 Variable Manufacturing Overhead $5.80 $4.50 $8.00 Variable Selling Cost per Unit $7.70 $3.20 $4.90 Mixing Minutes per Unit 13.70 3.00 2.00 Monthly Demand in Units 3,000 1,000 2,000XYZ Company has two divisions, X and Y. X makes product X1 and Y makes product Y+. Every unit of product Y+ requires one unit of product X1 as a component. Y purchases most of its X1 requirement from X although sometimes it makes purchases from outside suppliers. Relevant details of products X1 and Y+ are tabulated as follows: Product X1 Product Y+ Established selling price $30 $50 Variable Cost Per Unit - Mat 8 5 Transfer price 30 Labor 5 3 Overhead 2 2 Total Variable Cost 15 40 Fixed Costs 500,000 225,000 Annual Outside Demand 100,000 25,000 Plant Capacity 130,000 30,000 Investment in Divisions: (X) $ 6,625,000 (Y) $ 1,250,000 Division Y is currently achieving an ROI below target. It’s manager blames this on the high transfer price of product X1. The manager of Division X claims that the current transfer price ($30) is appropriate since ‘it is determined by the market’. The manager of division…Division X makes a part that it sells to customers outside of the company. Data concerning this part appear below: Selling price to outside customers.... Variable cost per unit. Total fixed costs....... Capacity in units. $50 $30 Select one: O a. $50 O b. $49 O c. $46 O d. $30 $400,000 25,000 Division Y of the same company would like to use the part manufactured by Division X in one of its products. Division Y currently purchases a similar part made by an outside company for $49 per unit and would substitute the part made by Division X. Division Y requires 5,000 units of the part each period. Division X has ample excess capacity to handle all of Division Y's needs without any increase in fixed costs and without cutting into outside sales. According to the formula in the text, what is the lowest acceptable transfer price from the standpoint of the selling division?