The Sheridan Company is a multidivisional company. Its managers have full responsibility for profits and complete autonomy to accept or reject transfers from other divisions. Division A produces a sub-assembly part for which there is a competitive market. Division B currently uses this sub-assembly for a final product that is sold outside at $1,368. Division A charges Division B the market price of $798 per unit of the part. Unit variable costs are $594 and $684 for Divisions A and B, respectively. The manager of Division B feels that Division A should transfer the part at a lower price than market because at market, Division B is unable to make a profit. (a) Your answer is correct. Calculate Division B's contribution margin if transfers are made at the market price, and calculate the company's total contribution margin. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) (b) (c) Division B's contribution margin $ Company's total contribution margin eTextbook and Media Your answer is partially correct. -114 i 90 Attempts: 1 of 2 used Assume that Division A can sell all its production in the open market. Should Division A transfer the goods to Division B? The transfer should not be made. If so, at what price? Market price eTextbook and Media Attempts: 2 of 2 used Assume that Division A can sell only 500 units externally at $798 per unit out of the 1,000 units that it can produce every month. Assume also that a 20% reduction in price is necessary to sell all 1,000 units each month. Should transfers be made? If so, how many units should the division transfer and at what price? (Round price per unit to 1 decimal place, e.g. 52.7.) eTextbook and Media Save for Later units at Attempts: 0 of 2 used Submit Answer
The Sheridan Company is a multidivisional company. Its managers have full responsibility for profits and complete autonomy to accept or reject transfers from other divisions. Division A produces a sub-assembly part for which there is a competitive market. Division B currently uses this sub-assembly for a final product that is sold outside at $1,368. Division A charges Division B the market price of $798 per unit of the part. Unit variable costs are $594 and $684 for Divisions A and B, respectively. The manager of Division B feels that Division A should transfer the part at a lower price than market because at market, Division B is unable to make a profit. (a) Your answer is correct. Calculate Division B's contribution margin if transfers are made at the market price, and calculate the company's total contribution margin. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) (b) (c) Division B's contribution margin $ Company's total contribution margin eTextbook and Media Your answer is partially correct. -114 i 90 Attempts: 1 of 2 used Assume that Division A can sell all its production in the open market. Should Division A transfer the goods to Division B? The transfer should not be made. If so, at what price? Market price eTextbook and Media Attempts: 2 of 2 used Assume that Division A can sell only 500 units externally at $798 per unit out of the 1,000 units that it can produce every month. Assume also that a 20% reduction in price is necessary to sell all 1,000 units each month. Should transfers be made? If so, how many units should the division transfer and at what price? (Round price per unit to 1 decimal place, e.g. 52.7.) eTextbook and Media Save for Later units at Attempts: 0 of 2 used Submit Answer
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:The Sheridan Company is a multidivisional company. Its managers have full responsibility for profits and complete autonomy to accept
or reject transfers from other divisions. Division A produces a sub-assembly part for which there is a competitive market. Division B
currently uses this sub-assembly for a final product that is sold outside at $1,368. Division A charges Division B the market price of
$798 per unit of the part. Unit variable costs are $594 and $684 for Divisions A and B, respectively.
The manager of Division B feels that Division A should transfer the part at a lower price than market because at market, Division B is
unable to make a profit.
(a)
Your answer is correct.
Calculate Division B's contribution margin if transfers are made at the market price, and calculate the company's total
contribution margin. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
(b)
(c)
Division B's contribution margin
$
Company's total contribution margin
eTextbook and Media
Your answer is partially correct.
-114 i
90
Attempts: 1 of 2 used
Assume that Division A can sell all its production in the open market. Should Division A transfer the goods to Division B?
The transfer should not
be made.
If so, at what price?
Market price
eTextbook and Media
Attempts: 2 of 2 used
Assume that Division A can sell only 500 units externally at $798 per unit out of the 1,000 units that it can produce every month.
Assume also that a 20% reduction in price is necessary to sell all 1,000 units each month. Should transfers be made?
If so, how many units should the division transfer and at what price? (Round price per unit to 1 decimal place, e.g. 52.7.)
eTextbook and Media
Save for Later
units at
Attempts: 0 of 2 used Submit Answer
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