More infoDivision C has in the past always purchased its requirement of aparticular tractor-engine component from division A. However, when informed thatdivision A is increasing its selling price to $145, division C's manager decides topurchase the engine component from external suppliers.Division C can purchase the component for $125 per unit in the open market.Division A insists that, because of the recent installation of some highly specializedequipment and the resulting high depreciation charges, it will not be able to earnan adequate return on its investment unless it raises its price. Division A's managerappe to management of Josh - Lester for support in the dispute with divisionC and supplies the following operating data:C's annual purchases of the tractor-engine componentA's variable cost per unit of the tractor-engine componentA's fixed cost per unit of the tractor-engine componentIX1,300 units$105$30Data tablePurchase costs paid to external suppliersLess: Savings in variable costsNet cost to the company as a result of purchasing from external suppliersPrintDone$162,500136,50026,000IX The Josh - Lester Corporation, manufacturer of tractors and other heavy farm equipment, isorganized along decentralized product lines, with each manufacturing division operating as aseparate profit center. Each division manager has been delegated full authority on all decisionsinvolving the sale of that division's output both to outsiders and to other divisions of Josh - Lester.i(Click the icon to view the information on the divisions.)Begin by calculating the contribution margin from selling units to other customers. Then calculate the net benefit (cost) to the company as a whole. (Enter a net cost using parentheses or aminus sign.)Less:The company already completed an analysis to determine if it was in its best interest tohave division C purchase 1,300 units from an external supplier for $125 per unit,assuming that there are no alternative uses for internal facilities of division A.(Click the icon to view the results of the analysis.)Now, assume that division A can sell the 1,300 units to other customers at $151 per unit,with variable marketing costs of $6 per unit.Read the requirement.Contribution margin from selling units to other customers

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The Josh-Lester Corporation, manufacturer of tractors and other heavy farm equipment, is organized along decentralized product lines, with each manufacturing division operating as a separate profit center. Each division manager has been delegated full authority on all decisions nvolving the sale of that division's output both to outsiders and to other divisions of Josh-Lester. i(Click the icon to view the information on the divisions.) Less: C Contribution margin from selling units to other customers The company already completed an analysis to determine if it was in its best interest have division C purchase 1,300 units from an external supplier for $125 per unit, assuming that there are no alternative uses for internal facilities of division A. (Click the icon to view the results of the analysis.) Begin by calculating the contribution margin from selling units to other customers. Then calculate the net benefit (cost) to the company as a whole. (Enter a net cost using parentheses or a minus sign.) Now, assume that division A can sell the 1,300 units to other customers at $151 per with variable marketing costs of $6 per unit. Read the requirement.

The Josh-Lester Corporation, manufacturer of tractors and other heavy farm equipment, is organized along decentralized product lines, with each manufacturing division operating as a separate profit center. Each division manager has been delegated full authority on all decisions nvolving the sale of that division's output both to outsiders and to other divisions of Josh-Lester. i(Click the icon to view the information on the divisions.) Less: C Contribution margin from selling units to other customers The company already completed an analysis to determine if it was in its best interest have division C purchase 1,300 units from an external supplier for $125 per unit, assuming that there are no alternative uses for internal facilities of division A. (Click the icon to view the results of the analysis.) Begin by calculating the contribution margin from selling units to other customers. Then calculate the net benefit (cost) to the company as a whole. (Enter a net cost using parentheses or a minus sign.) Now, assume that division A can sell the 1,300 units to other customers at $151 per with variable marketing costs of $6 per unit. Read the requirement.

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter24: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 8E: Rocky Mountain Airlines Inc. has two divisions organized as profit centers, the Passenger Division...

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The Kelly-Elias Corporation, manufacturer of tractors and other heavy farm equipment, is organized along decentralized product lines, with each manufacturing division operating as a separate profit center. Each division manager has been delegated full authority on all decisions involving the sale of that division’s output both to outsiders and to other divisions of Kelly-Elias. Division C has in the past always purchased its requirement of a particular tractor-engine component from division A. However, when informed that division A is increasing its selling price to $135, division C’s manager decides to purchase the engine component from external suppliers. Division C can purchase the component for $115 per unit in the open market. Division A insists that, because of the recent installation of some highly specialized equipment and the resulting high depreciation charges, it will not be able to earn an adequate return on its investment unless it raises its price. Division A’s manager…
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