Managerial Accounting: Creating Value in a Dynamic Business Environment
12th Edition
ISBN: 9781260417074
Author: HILTON, Ronald
Publisher: MCGRAW-HILL HIGHER EDUCATION
expand_more
expand_more
format_list_bulleted
Question
Chapter 13, Problem 35E
1.
To determine
State whether the assembly division’s manager would likely accept or reject the special offer, and describe the reason behind it.
2.
To determine
Describe whether the above decision in the best interests of the company as a whole and explain the reason.
3.
To determine
Describe the manner in which the given situation could be resolved using the transfer price.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Use this information for Jefferson Company to answer the question that follow.Materials used by Jefferson Company in producing Division C's product are currently purchased from outside suppliers at a cost of $10.00 per unit. However, the same materials are available with Division A. Division A has unused capacity and can produce the materials needed by Division C at a variable cost of $8.50 per unit. A transfer price of $9.50 per unit is negotiated and 25,000 units of material are transferred, with no reduction in Division A's current sales.How much will Jefferson's total income from operations increase?
a.$100,000
b.$37,500
c.$150,000
d.$62,500
Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $332 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $276 per unit.
A. If a transfer price of $302 per unit is established and 28,900 units of materials are transferred, with no reduction in the Components Division's current sales, how much would Ziegler Inc.’s total operating income increase?
B. How much would the Instrument Division's operating income increase?
C. How much would the Component Division's operating income increase?
Wattle Limited has two divisions: Industry and Consumer. The Industry Division transfers partially completed components to the Consumer Division at a predetermined transfer price. The Industry Division’s standard variable production cost per unit is $500. This division could sell all its components to outside buyers at $650 per unit in a perfectly competitive market.
The Consumer Division has a special offer of $740 for its product. The Consumer Division incurs variable costs of $260 in addition to the transfer price for the Industry Division’s components. Both Industry and Consumer divisions currently have spare production capacity.
Required:
a) Determine a transfer price using the general transfer pricing rule. )
b) Assume that the transfer price has been set at $530, is the Consumer Division manager likely to
want to accept or reject the special offer? Why?
c) Is the decision in the best interests of Wattle Limited as a whole? Explain.
Chapter 13 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 13 - What is the managerial accountants primary...Ch. 13 - Define goal congruence, and explain why it is...Ch. 13 - Describe the managerial approach known as...Ch. 13 - Prob. 4RQCh. 13 - Prob. 5RQCh. 13 - Prob. 6RQCh. 13 - Create an example showing how residual income is...Ch. 13 - What is the chief disadvantage of ROI as an...Ch. 13 - Why is there typically a rise in ROI or residual...Ch. 13 - Define the term economic value added. How does it...
Ch. 13 - Distinguish between the following measures of...Ch. 13 - Why do some companies use gross book value instead...Ch. 13 - Explain why it is important in performance...Ch. 13 - How do organizations use pay for performance to...Ch. 13 - Describe an alternative to using ROI or residual...Ch. 13 - Prob. 16RQCh. 13 - Prob. 17RQCh. 13 - Discuss the importance of nonfinancial information...Ch. 13 - Identify and explain the managerial accountants...Ch. 13 - Describe four methods by which transfer prices may...Ch. 13 - Explain the significance of excess capacity in the...Ch. 13 - Why might income-tax laws affect the...Ch. 13 - Prob. 23RQCh. 13 - The following data pertain to Dakota Divisions...Ch. 13 - Refer to the preceding exercise. Requited:...Ch. 13 - Refer to the data for Exercise 1324. Assume that...Ch. 13 - Golden Gate Construction Associates, a real estate...Ch. 13 - Prob. 28ECh. 13 - Prob. 29ECh. 13 - Refer to Exhibit 133. Assume that you are a...Ch. 13 - Prob. 32ECh. 13 - Prob. 33ECh. 13 - Prob. 34ECh. 13 - Prob. 35ECh. 13 - Long Beach Pharmaceutical Company has two...Ch. 13 - Prob. 37PCh. 13 - Prob. 38PCh. 13 - Long Beach Pharmaceutical Company has two...Ch. 13 - Prob. 40PCh. 13 - Prob. 41PCh. 13 - Megatronics Corporation, a massive retailer of...Ch. 13 - Prob. 43PCh. 13 - Prob. 44PCh. 13 - Prob. 45PCh. 13 - Clearview Window Company manufactures windows for...Ch. 13 - Prob. 47PCh. 13 - Alpha Communications, Inc., which produces...Ch. 13 - Prob. 49PCh. 13 - Holiday Entertainment Corporation (HHC), a...Ch. 13 - InterGlobal Industries is a diversified...Ch. 13 - Prob. 52C
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of 1,350 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of 900 per unit. a. If a transfer price of 1,000 per unit is established and 75,000 units of materials are transferred, with no reduction in the Components Divisions current sales, how much would Ziegler Inc.s total operating income increase? b. How much would the Instrument Divisions operating income increase? c. How much would the Components Divisions operating income increase?arrow_forwardOakes Inc. manufactured 40,000 gallons of Mononate and 60,000 gallons of Beracyl in a joint production process, incurring 250,000 of joint costs. Oakes allocates joint costs based on the physical volume of each product produced. Mononate and Beracyl can each be sold at the split-off point in a semifinished state or, alternatively, processed further. Additional data about the two products are as follows: An assistant in the companys cost accounting department was overheard saying ...that when both joint and separable costs are considered, the firm has no business processing either product beyond the split-off point. The extra revenue is simply not worth the effort. Which of the following strategies should be recommended for Oakes?arrow_forwardThe following product Costs are available for Haworth Company on the production of chairs: direct materials, $15,500; direct labor, $22.000; manufacturing overhead, $16.500; selling expenses, $6,900; and administrative expenses, $15,200. What are the prime costs? What are the conversion costs? What is the total product cost? What is the total period cost? If 7,750 equivalent units are produced, what is the equivalent material cost per unit? If 22,000 equivalent units are produced, what is the equivalent conversion cost per unit?arrow_forward
- The Fabrication Division’s full (absorption) cost of a component is $340, which includes $40 of applied fixed-overhead costs. The transfer price has been set at $374, which is the Fabrication Division’s full cost plus a 10 percent markup.The Assembly Division has a special offer for its product of $465. The Assembly Division incurs variable costs of $100 in addition to the transfer price for the Fabrication Division’s components. Both divisions currently have excess production capacity. Required:1. What is the Assembly Division’s manager likely to do regarding acceptance or rejection of the special offer? Why?2. Is this decision in the best interests of the company as a whole? Why?3. How could the situation be remedied using the transfer price?arrow_forwardMaterials used by the Instrument Division of T_Kong Industries are currently purchased from outside suppliers at a cost of $290 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $241 per unit. a. If a transfer price of $264 per unit is established and 39,200 units of materials are transferred, with no reduction in the Components Division’s current sales, how much would T_Kong Industries’ total income from operations increase?$ b. How much would the Instrument Division’s income from operations increase?$ c. How much would the Components Division’s income from operations increase?$arrow_forwardRundle Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,300 containers follows. Unit-level materials. Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Rundle for $2.60 each. Required a. Calculate the total relevant cost. Should Rundle continue to make the containers? b. Rundle could lease the space it currently uses in the manufacturing process. If leasing would produce $11,600 per month, calculate the total avoidable costs. Should Rundle continue to make the containers? Answer is complete but not entirely correct. $ a. Total relevant cost a. Should Rundle continue to make the containers? b. Total avoidable cost b. Should Rundle continue to make the containers? 190.650,000 Yes $24,180,000 $ 5,200 6,100 4,000 7,800…arrow_forward
- Please type your answer to this question in the space below and show your work for maximum points. Be sure to indicate which part(s) of the question you are answering. Materials used by the Stanley Company's Division 1 are currently purchased from outside supplier at $59 per unit. Division 2 is able to supply Division 1 with 18,000 units at a variable cost of $43 per unit. The two divisions have recently negotiated a transfer price of $49 per unit for the 18,000 unìts. (a) By how much will each division's income increase as a result of this transfer? (b) What is the total increase in income for Stanley? Edit Format Table 12pt v Paragraph v BIUAv ļ T? v E EV O words :::: ..arrow_forwardBarrington Box Enterprises has two divisions, large and small, that share the common costs of the company's communications network. The annual common costs are $4,680,000. You have been provided with the following information for the upcoming year: Large Small Calls 117,000 78,000 The cost accountant determined $2,800,000 of the communication network's costs were fixed and should be allocated based on the number of calls. The remaining costs should be allocated based on the time on the network. What is total communication network costs allocated to the Small Box Division, assuming the company uses dual-rates to allocate common costs? Multiple Choice $2,248,000 $1,880,000 $859,692 Time on Network (hours) 144,000 216,000 $1,388,308arrow_forwardJordan Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,100 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs Allocated facility-level costs $ 5,700 6,800 3,900 8,100 27,200 One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Jordan for $2.90 each. Required a. Calculate the total relevant cost. Should Jordan continue to make the containers? b. Jordan could lease the space it currently uses in the manufacturing process. If leasing would produce $12.300 per rhonth, calculate the total avoidable costs. Should Jordan continue to make the containers? a. Total relevant cost Should Jordan continue to make the containers? b. Total avoidable cost Should Jordan continue to make the containers?arrow_forward
- The cost of operating the Maintenance Department is to be allocated to four production departments based on the floor space each occupies. Department A occupies 600 m²; Department B, 900 m²; Department C, 1200 m²; and Department D, 600 m². If the July cost was $17,600, how much of the cost of operating the Maintenance Department should be allocated to each production department? The operating cost for Department A is $ (Simplify your answer.) The operating cost for Department B is $ (Simplify your answer.) The operating cost for Department C is $ (Simplify your answer.) The operating cost for Department D is $ (Simplify your answer.)arrow_forwardhe materials used by the Multinomah Division of Dolan Company are currently purchased from outside suppliers at $42 per unit. These same materials are produced by the Pembroke Division. The Pembroke Division can produce the materials needed by the Multinomah Division at a variable cost of $28 per unit. The division is currently producing 120,000 units and has capacity of 180,000 units. The two divisions have recently negotiated a transfer price of $36 per unit for 24,000 units. By how much will each division's income increase as a result of this transfer?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 $390. 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 $635. 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? 2. Transfer price (full capacity) 3. Transfer price (excess capacity)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
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,
Incremental Analysis - Sell or Process Further; Author: Melissa Shirah;https://www.youtube.com/watch?v=7D6QnBt5KPk;License: Standard Youtube License