Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
expand_more
expand_more
format_list_bulleted
Question
Chapter 10, Problem 6PB
(1)
To determine
Indicate whether the market price will be an appropriate transfer price for Company E.
(2)
To determine
Ascertain the increase in S Division, NS Division, and Company E income from operations as a result of transfer pricing
(3)
To determine
Prepare the income statements for S and NS Divisions of Company E for the year ended December 31, 20Y8
(4)
To determine
Ascertain the increase in S Division, NS Division, and Company E income from operations as a result of transfer pricing
(5) a
To determine
Ascertain the range of transfer price, if negotiated price approach is used
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Garcon Inc. manufactures electronic products, with two operating divisions, Consumer and Commercial. Condensed divisional income statements, which involve no intracompany transfers and which include a breakdown of expenses into variable and fixed components, are as follows:
(refer to pic)
2.
If the Commercial Division purchases 2,880 units from the Consumer Division, rather than externally, at a negotiated transfer price of $115 per unit, how much would the income from operations of each division and the total company income from operations increase?
3.
Prepare condensed divisional income statements for Garcon Inc. based on the data in Requirement 2.
4.
If a transfer price of $126 per unit is negotiated, how much would the income from operations of each division and the total company income from operations increase?
Exoplex Industries Inc. is a diversified aerospace company, including two operating divisions, Semiconductors and Navigational Systems. Condensed divisional income statements, which involve no intracompany transfers and include a breakdown of expenses into variable and fixed components, are as follows:
Exoplex Industries Inc.Divisional Income StatementsFor the Year Ended December 31, 20Y8
SemiconductorsDivision
NavigationalSystemsDivision
Total
Sales:
2,240 units × $396 per unit
$887,040
$887,040
3,675 units × $590 per unit
$2,168,250
2,168,250
Total sales
$887,040
$2,168,250
$3,055,290
Expenses:
Variable:
2,240 units × $232 per unit
$(519,680)
$(519,680)
3,675 units × $472* per unit
$(1,734,600)
(1,734,600)
Fixed
(220,000)
(325,000)
(545,000)
Total expenses
$(739,680)
$(2,059,600)
$(2,799,280)
Operating income
$147,360
$108,650…
Transfer Pricing
Exoplex Industries Inc. is a diversified aerospace company, including two operating divisions, Semiconductors and Navigational Systems. Condensed divisional income statements, which involve no intracompany transfers and include a breakdown of expenses into variable and fixed components, are as follows:
Exoplex Industries Inc.Divisional Income StatementsFor the Year Ended December 31, 20Y8
SemiconductorsDivision
NavigationalSystemsDivision
Total
Sales:
2,240 units × $396 per unit
$887,040
$887,040
3,675 units × $590 per unit
$2,168,250
2,168,250
Total sales
$887,040
$2,168,250
$3,055,290
Expenses:
Variable:
2,240 units × $232 per unit
$519,680
$519,680
3,675 units × $472* per unit
$1,734,600
1,734,600
Fixed
220,000
325,000
545,000
Total expenses
$739,680
$2,059,600
$2,799,280
Income from operations
$147,360
$108,650
$256,010…
Chapter 10 Solutions
Managerial Accounting
Ch. 10 - Differentiate between centralized and...Ch. 10 - Differentiate between a profit center and an...Ch. 10 - Prob. 3DQCh. 10 - What is the major shortcoming of using operating...Ch. 10 - In a decentralized company in which the divisions...Ch. 10 - How does using the return on investment facilitate...Ch. 10 - (a) Explain how return on investment might lead a...Ch. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - When using the negotiated price approach to...
Ch. 10 - Budgetary performance for cost center Vinton...Ch. 10 - Support department allocations The centralized...Ch. 10 - Prob. 3BECh. 10 - Profit margin, investment turnover, and ROI Briggs...Ch. 10 - Residual income The Commercial Division of Galena...Ch. 10 - Prob. 6BECh. 10 - Budget performance reports for cost centers...Ch. 10 - The following data were summarized from the...Ch. 10 - For each of the following support departments,...Ch. 10 - Prob. 4ECh. 10 - Service department charges In divisional income...Ch. 10 - Varney Corporation, a manufacturer of electronics...Ch. 10 - Horton Technology has two divisions, Consumer and...Ch. 10 - Rocky Mountain Airlines Inc. has two divisions...Ch. 10 - Championship Sports Inc. operates two divisionsthe...Ch. 10 - Prob. 10ECh. 10 - The operating income and the amount of invested...Ch. 10 - Prob. 12ECh. 10 - The condensed income statement for the Consumer...Ch. 10 - The Walt Disney Company (DIS) has four business...Ch. 10 - Prob. 15ECh. 10 - Prob. 16ECh. 10 - Materials used by the Instrument Division of...Ch. 10 - Prob. 18ECh. 10 - GHT Tech Inc. sells electronics over the Internet....Ch. 10 - Profit center responsibility reporting for a...Ch. 10 - Prob. 3PACh. 10 - Effect of proposals on divisional performance A...Ch. 10 - Divisional performance analysis and evaluation The...Ch. 10 - Prob. 6PACh. 10 - Prob. 1PBCh. 10 - Prob. 2PBCh. 10 - Prob. 3PBCh. 10 - Prob. 4PBCh. 10 - Divisional performance analysis and evaluation The...Ch. 10 - Prob. 6PBCh. 10 - Prob. 1MADCh. 10 - Prob. 2MADCh. 10 - Papa Johns International, Inc. (PZZA), operates...Ch. 10 - Panera Bread Company (PNRA) operates over 2,000...Ch. 10 - Prob. 5MADCh. 10 - Prob. 1TIFCh. 10 - Prob. 2TIFCh. 10 - Prob. 3TIFCh. 10 - The three divisions of Yummy Foods are Snack...Ch. 10 - Prob. 5TIFCh. 10 - Prob. 1CMACh. 10 - Prob. 2CMACh. 10 - Prob. 3CMACh. 10 - Morrisons Plastics Division, a profit center,...
Knowledge Booster
Similar questions
- General Transfer Pricing Rule Scottsdale Manufacturing is organized into two divisions:Fabrication and Assembly. Components transferred between the two divisions are recorded at a predetermined transfer price. Standard variable manufacturing cost per unit in the Fabrication Divisionis $500. At the present time, this division is working to capacity. Fabrication estimates that the unitsit produces could be sold on the external market for $650. The product under consideration is viewedas a commodity-type product, with no differentiating features or characteristics.Required1. What roles are played by transfer prices? That is, why are transfer prices needed?2. Use the general transfer pricing rule presented in the chapter to determine an appropriate transfer price.Why is the amount you calculated considered an appropriate transfer price?3. What if the Fabrication Division had excess capacity? How would this change the indicated transferprice? Why is the amount you determined considered an…arrow_forwardTransfer pricing Garcon Inc. manufactures electronic products, with two operating divisions, Consumer and Commercial. Condensed divisional income statements, which involve no intracompany transfers and which include a breakdown of expenses into variable and fixed components, are as follows: Garcon Inc.Divisional Income StatementsFor the Year Ended December 31, 20Y2 ConsumerDivision Commercial Division Total Sales: 14,400 units × $144 per unit $2,073,600 $2,073,600 21,600 units × $275 per unit $5,940,000 5,940,000 Total sales $2,073,600 $5,940,000 $8,013,600 Expenses: Variable: 14,400 units × $104 per unit $(1,497,600) $(1,497,600) 21,600 units × $193* per unit $(4,168,800) (4,168,800) Fixed (200,000) (520,000) (720,000) Total expenses $(1,697,600)…arrow_forwardThe condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as follows (assuming no support department allocations): The manager of the Consumer Products Division is considering ways to increase the return on investment. a. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that 143,750,000 of assets have been invested in the Consumer Products Division. b. If expenses could be reduced by 3,450,000 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on investment for the Consumer Products Division?arrow_forward
- XYZ prepared a segmented income statement that included the following data for its X marketing segment: Net sales $950,000 Fixed costs controllable by the X marketing segment manager $150,000 Fixed X marketing costs controllable by corporate management $250,000 Fixed manufacturing costs allocated to the X marketing segment $110,000 Variable manufacturing costs $200,000 Variable selling costs $100,000 Variable administrative costs $95,000 The best measure of the economic performance of the X marketing segment’s manager is:arrow_forwardScottsdale Manufacturing is organized into two divisions: Fabrication and Assembly. Components transferred between the two divisions are recorded at a predetermined transfer price. Standard variable manufacturing cost per unit in the Fabrication Division is $350. At the present time, this division is working to capacity. Fabrication estimates that the units it produces could be sold on the external market for $580. The product under consideration is viewed as a commodity-type product, with no differentiating features or characteristics. Required: 2. Based on the general transfer pricing rule presented in the chapter, what is the minimum transfer price between units when the Fabrication Division is working to capacity? 3. What if the Fabrication Division had excess capacity? How would this change the minimum transfer price as determined by the application of the general transfer pricing rule?arrow_forwardFranklin, Inc. has two divisions, Seward and Charles. Following is the income statement for the previous year: Seward Charles Sales $ 744,500 $ 744,500 Variable Costs 476,950 670,050 Contribution Margin $ 267,550 $ 74,450 Fixed Costs 124,400 124,400 Profit Margin $ 143,150 $ (49,950) Of the total fixed costs, $240,000 are common fixed costs that are allocated equally between the divisions. What would Franklin's profit margin be if Charles were dropped? A) $143,150 B) $267,550 C) $23,150 D) $744,500arrow_forward
- (J) Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division ADivision BDivision CSales$ 12,120,000$ 28,120,000$ 20,120,000Average operating assets$ 3,030,000$ 7,030,000$ 5,030,000Net operating income$ 496,920$ 449,920$ 503,000Minimum required rate of return7.00%7.50%10.00%Required: 1. Compute the margin, turnover, and return on investment (ROI) for each division. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 8% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept the opportunityarrow_forward1. Ajax Division of Carlyle Corporation produces electric motors, 20% of which are sold to Bradley Division of Carlyle and the remainer to outside customers. Carlyle treats ist divisions as profit centers and allows division managers to choose their sources of sales and supply. Corporate policy requires that all interdivisional sales and purchases be recorded at variable cost as a transfer price. Ajax Division's estimated sales and standard cost data for the year ending December 31, 2013 based on the full capacity of 100,000 units, are as follows: Sales Variable costs Fixed costs Gross margin Unit sales Bradley $900,000 (900,000) (300,000) $(300,000) 20,000 outsiders $8,000,000 (3,600,000) (1,200,000) $3,200,000 80,000 Ajax has an opportunity to sell the above 20,000 units to an outside customer at a price of $75 per unit during 2013 on a continuing basis. Bradley can purchase its requirements from an outsider supplier at a price of $85 per unit. Assuming that Carlyle desires to…arrow_forwardUchimura Corporation has two divisions: the AFE Division and the GBI Division. The corporation's net operating income is $11,800. The AFE Division's divisional segment margin is $81,600 and the GBI Division's divisional segment margin is $46,700. What is the amount of the common fixed expense not traceable to the individual divisions? Multiple Choice $93,400 $116,500 $58,500 $128,300arrow_forward
- Shirley Incorporated has three divisions, King, West and Gold. All common fixed costs are unavoidable. Following is the segmented income statement for the previous year: Sales revenue Variable costs Contribution margin Direct fixed costs Segment margin Common fixed costs (allocated) Net operating income (loss) King $ 1,040,000 312,000 $ 728,000 104,000 $ 624,000 391,000 $ 233,000 Required: a. What would Shirley's net income (loss) be if the West Division were dropped? b. What would Shirley's net income (loss) be if the Gold Division were dropped? Complete this question by entering your answers in the tabs below. Required A Required B What would Shirley's net income (loss) be if the West Division were dropped? Gold $426,000 251,340 $ 174,660 48.000 $ 126,660 159,375 $ (32,715) Total $ 2,048,000 889,260 $ 1,158,740 192,000 $ 966,740 763,000 $ 203,740arrow_forwardThe condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as follows (assuming no support department allocations): Sales $744,000 Cost of goods sold (334,800) Gross profit $409,200 Administrative expenses (148,800) Operating income $260,400 The manager of the Consumer Products Division is considering ways to increase the return on investment. a. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that $1,240,000 of assets have been invested in the Consumer Products Division. Round the investment turnover to one decimal place. Profit margin % Investment turnover Return on investment % b. If expenses could be reduced by $37,200 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on investment for the Consumer Products Division? Round the investment…arrow_forwardNeelon Corporation has two divisions: Southern Division and Northern Division. The following data are for the most recent operating period: Sales Variable expenses Traceable fixed expenses Common fixed expense Total Company Southern Division $ 418,000 $ 193,000 $ 130,880 $ 79,130 $ 186,000 $ 77,000 $ 79,420 $ 36,670 Northern Division $ 225,000 $ 51,750 $ 109,000 $ 42,750 The common fixed expenses have been allocated to the divisions on the basis of sales. What is the company's overall net operating income if it operates at the break-even points for its two divisions? Multiple Choice $(79,420) $21,700 $(265,420) $0arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,