Managerial Accounting
17th Edition
ISBN: 9781260247787
Author: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Publisher: RENT MCG
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Question
Chapter 11, Problem 7E
1.
To determine
Introduction: Net operating income (NOI) is a measure of profitability wherein expenses are deducted from sales. The interest and taxes are not taken into consideration while computing NOI. It reveals the company's income from core activities.
The net operating income earned by each division and company as a whole.
2.
To determine
Introduction: Transfer price is the price charged by one department of a company to another department when goods or services are transferred. For example, Department A and Department B are the two departments of Company F. Department A produces Raw Material X, which is an input for Department B's final product. If Departments A and B agree to an inter-departmental transfer of Raw Material X, it will take place at a transfer price agreed upon by the managers of both departments.
To explain: Whether Division A should sell additional 1,000 units to Division B or not and provide its reasoning.
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Exercise 7 (Transfer Pricing from Viewpoint of the Entire Company)
Division E manufactures picture tubes for TVs. The tubes can be sold either
to Division F of the same company or to outside customers. Last year, the
following activity was recorded in Division E:
Selling price per tube..
Production cost per tube...
P175
P130
Number of tubes:
Produced during the year
20,000
16,000
4,000
Sold to outside customers
Sold to Division F.
Sales to Division F were at the same price as sales to outside customers. The
tubes purchased by Division F were used in a TV set manufactured by that
division. Division F incurred P300 in additional cost per TV and then sold
the TVs for P600 each.
Required:
1. Prepare income statements for last year for Division E, Division F, and
the company as a whole.
2. Assume that Division E's manufacturing capacity is 20,000 tubes per
year. Next year, Division F wants to purchase 5,000 tubes from Division
E, rather than only 4,000 tubes as in last year. (Tubes of this…
Question 10.4
Big Machines Corp. has two divisions. Division Y manufactures components that can be sold in the external market place or transferred to Division Z for further processing. The following data relate to Division Y's component product.
Variable manufacturing costs/unit
$925
Fixed costs/unit at capacity
$275
Selling price/unit
$1,800
The capacity of the plant is 2,500 units per year.
Division Z has offered to purchase 350 units from Division Y at a price of $1,600/unit, which is the market price of the component. The manager of Division Y has refused this offer stating that it would only return a rate of 25.00%, when the divisional target return on sales is 28.00%. The Division Y manager also states that additional fixed costs of $195,000 would be required to produce the 350 units.
The corporate required rate of return is 18% of assets and the existing asset base in Division Y is $2,500,000.
Required:
How many units must Division Y sell in order…
Exercise 15-32 (Algo) International Transfer Prices (LO 15-4)
San Jose Company operates a Manufacturing Division and an Assembly Division. Both divisions are evaluated as profit centers. Assembly buys components from Manufacturing and assembles them for sale. Manufacturing sells many components to third parties in addition to Assembly. Selected data from the two operations follow.
Manufacturing
Assembly
Capacity (units)
402,000
202,000
Sales pricea
$
404
$
1,310
Variable costsb
$
170
$
484
Fixed costs
$
40,020,000
$
24,020,000
a For Manufacturing, this is the price to third parties.
b For Assembly, this does not include the transfer price paid to Manufacturing.
Suppose Manufacturing is located in Country A with a tax rate of 70 percent and Assembly in Country B with a tax rate of 30 percent. All other facts remain the same.
Required:
a. Current production levels in Manufacturing are 202,000 units. Assembly requests an additional…
Chapter 11 Solutions
Managerial Accounting
Ch. 11 - Prob. 1QCh. 11 - Prob. 2QCh. 11 - Prob. 3QCh. 11 - Prob. 4QCh. 11 - Prob. 5QCh. 11 - Prob. 6QCh. 11 - Prob. 7QCh. 11 - Prob. 8QCh. 11 - Prob. 9QCh. 11 - Prob. 10Q
Ch. 11 - Prob. 1AECh. 11 - Prob. 2AECh. 11 - Prob. 1F15Ch. 11 - Prob. 2F15Ch. 11 - Prob. 3F15Ch. 11 - Prob. 4F15Ch. 11 - Prob. 5F15Ch. 11 - Prob. 6F15Ch. 11 - Prob. 7F15Ch. 11 - Prob. 8F15Ch. 11 - Prob. 9F15Ch. 11 - Prob. 10F15Ch. 11 - Prob. 11F15Ch. 11 - (
$1,000,000
300,000
700,000
500.000
$
200,000
...Ch. 11 - Prob. 13F15Ch. 11 - Prob. 14F15Ch. 11 - Prob. 15F15Ch. 11 - Prob. 1ECh. 11 - Prob. 2ECh. 11 - Prob. 3ECh. 11 - Prob. 4ECh. 11 - Prob. 5ECh. 11 - Prob. 6ECh. 11 - Prob. 7ECh. 11 - Prob. 8ECh. 11 -
EXERCISE 11-9 Return on Investment (ROI) and...Ch. 11 - Prob. 10ECh. 11 - Prob. 11ECh. 11 - Prob. 12ECh. 11 - Prob. 13ECh. 11 - Prob. 14ECh. 11 - Prob. 15ECh. 11 - Prob. 16ECh. 11 - Prob. 17PCh. 11 - Prob. 18PCh. 11 - Prob. 19PCh. 11 - Prob. 20PCh. 11 - Prob. 21PCh. 11 - Prob. 22PCh. 11 - Prob. 23PCh. 11 - Prob. 24PCh. 11 - Prob. 25PCh. 11 - Prob. 26C
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