Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Question
Chapter 8, Problem 8.17E
(a)
To determine
Transfer Price: It refers to the price to be used for recording the transactions for the goods transferred from one division to another division of a company.
To Calculate: the Division B’s contribution margin and company’s total contribution margin.
(b)
To determine
Transfer Price: It refers to the price to be used for recording the transactions for the goods transferred from one division to another division of a company.
To explain: whether Division A should transfer the goods to Division B and what price.
(c)
To determine
Transfer Price: It refers to the price to be used for recording the transactions for the goods transferred from one division to another division of a company.
To explain: whether the transfers to be made in case of excess capacity.
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The Sunland 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 $1,392.
Division A charges Division B the market price of $812 per unit of the part. Unit variable costs are $604 and $696 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 has been saved. See score details after the due date.
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).)
Division B's…
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…
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 8 Solutions
Managerial Accounting: Tools for Business Decision Making
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