QS 22-19 (Algo) Determining transfer prices with excess capacity LO C1 The Windshield division of Jaguar Company makes windshields for use in its Assembly division. The Windshield division incurs variable costs of $296 per windshield and has capacity to make 590,000 windshields per year. The market price is $520 per windshield. The Windshield division incurs total fixed costs of $3,750,000 per year. If the Windshield division has excess capacity, what is the range of possible transfer prices that could be used on transfers between the Windshield and Assembly divisions? Transfer price per windshield will be at least but not more than

QS 22-19 (Algo) Determining transfer prices with excess capacity LO C1 The Windshield division of Jaguar Company makes windshields for use in its Assembly division. The Windshield division incurs variable costs of $296 per windshield and has capacity to make 590,000 windshields per year. The market price is $520 per windshield. The Windshield division incurs total fixed costs of $3,750,000 per year. If the Windshield division has excess capacity, what is the range of possible transfer prices that could be used on transfers between the Windshield and Assembly divisions? Transfer price per windshield will be at least but not more than

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 6PA: Morris Industries manufactures and sells three products (AA, BB, and CC). The sales price and unit...

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Morris Industries manufactures and sells three products (AA, BB, and CC). The sales price and unit variable cost for the three products are as follows: Their sales mix s reflected as a ratio of 5:3:2. Annual fixed costs shared by the three products are $25,000 per year. What are total variable costs for Morris with their current product mix? Calculate the number of units of each product that will need to be sold in order for Morris to break even. What is their break-even point in sales dollars? Using an income statement format, prove that this is the break-even point.
Exercise 15-29 (Algo) Evaluate Transfer Pricing System (LO 15-2) Southfield Division offers its product to outside markets for $124. It incurs variable costs of $49 per unit and fixed costs of $143,500 per month based on monthly production of 22,900 units. Northfield Division can acquire the product from an alternate supplier for $129 per unit or from Southwest Division for a transfer price of $124 plus $6 per unit in transportation costs. Required: a. What are the costs and benefits of the alternatives available to Southfield Division and Northfield Division with respect to the transfer of Southfield Division's product? Assume that Southfield Division can market all that it can produce. b. How would your answer change if Southfield Division had idle capacity sufficient to cover all of Northfield Division's needs? a. Net benefit b. Net benefit per unit per unit
7. Transfer Pricing Domagisko Company's Division 'S' (selling division) produces a small tool used by other companies as a key part in their products. Cost and sales data related to the small tool are given below: Selling price per unit Variable costs per unit P 50 P 30 Fixed costs per unit* P 12 based on capacity of 40,000 tools per year. The company's Division 'B' (buying division) is introducing a new product that will use the same tool such as the one produced by Division S. An outside supplier has quoted the Division B a price of P 48 per tool. Division B would like to purchase the tools from Division S, only if an acceptable transfer price can be worked out. REQUIRED: Consider the following independent cases: 1. Division S has ample idle capacity to handle all the Division B's needs: A) What is the minimum transfer price for Division S? B) What is the maximum transfer price for Division B? 2. Division S is presently selling all the tools it can produce to outside customers: A)…
TB MC Qu. 15-33 (Algo) You have been provided with the... You have been provided with the following information for Division X of a decentralized company: Selling price 105 48 Variable cost per unit Fixed cost per unit Sales volume (units) Capacity (units) 20 21,200 24,500 Division Y of the same company would like to purchase all of its units internally. Division Y needs 9,900 units each period and currently pays $99 per unit to an outside firm. What is the lowest price that Division X could accept from Division Y? (Assume that Division Y wants to use a sole supplier and will not purchase less than 9,900 from a supplier.) %24
6. Transfer Price Computation Pakyaw Company is operating with two divisions. Division S is producing a product line that is required as a component part of the product being manufactured by Division B. For Division S, the costs of producing the component part per unit are: P 10 Direct materials Direct labor P8 P5 P2 Variable factory overhead Fixed factory overhead The product of Division S is being sold in a highly competitive market for P 30 per unit. Division B is currently buying 80% of the production output of Division S at a negotiated price of P 28 per unit. It is expected that 25,000 units of product will be produced by Division S. With emphasis on divisional welfare rather than the company's welfare, a new transfer price must be developed. It is suggested that a 40% mark-up on cost will be added when transferring the product from Division S to Division B. The unit selling price of the product of Division B is P 45 while the additional unit processing cost is P 8. REQUIRED:…
Week 8Spark Ltd has two divisions, assembly and electrical. The assembly division transfers partiallycompleted components to the electrical division at a predetermined transfer price. The assemblydivision’s standard variable production cost per unit is $550. This division has spare capacity, and itcould sell all its components to outside buyers at $680 per unit in a perfectly competitive market.Required:-What transfer price would you recommend if there was no outside market for the transferred component and the assembly division had spare capacity? - Explain how negotiation between the supplying and buying units may be used to set transferprices. How does this relate to the general transfer pricing rule?
21.4 Transfer Prices The Hazel Division's unit sales price is $100 and its unit variable cost is $60. Hazel has capacity to produce 10,000 units and is currently selling 8,000 units externally. Fixed costs per unit are $32. If the Hazel Division sells 2,000 units to the Wolf Division, what is the opportunity cost per unit to the Hazel Division?
Exercise 11-7 (Algo) Transfer Pricing from the Viewpoint of the Entire Company (LO11-3] Division A manufactures electronic circuit boards that can be sold to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: Selling price per circuit board Variable cost per circuit board Number of circuit boards: Produced during the year Sold to outside customers Sold to Division B $ 189 $ 120 20,300 14,500 5,800 Sales to Division B were at the same price as sales to outside customers. The circuit boards purchased by Division B were used in an electronic instrument manufactured by that division (one board per instrument). Division B incurred $300 in additional variable cost per instrument and then sold the instruments for $690 each. Required: 1. Calculate the net operating incomes earned by Division A, Division B, and the company as a whole. 2. Assume Division A's manufacturing capacity is 20,300 circuit boards. Next year, Division B wants…
QUESTION 9 QRC Company is trying to decide which one of two alternatives it will accept. The costs and revenues associated with each alternative are listed below: Alternative A Alternative B Projected revenue $ 62,500 $ 75,000 Unit-level costs 12,500 18,000 Batch-level costs 6,250 12,000 Product-level costs 7,500 8,500 Facility-level costs 5,000 6,250 What is the differential revenue for this decision? $62,500 $25,000 $75,000 $12,500
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) 415,000 215,000 Sales pricea $ 430 $ 1,375 Variable costsb $ 235 $ 510 Fixed costs $ 40,150,000 $ 24,150,000 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 60 percent and Assembly in Country B with a tax rate of 40 percent. All other facts remain the same. Required: a. Current production levels in Manufacturing are 215,000 units. Assembly requests an additional…
Division A makes a part with the following characteristics: Production capacity in units Selling price to outside customers Variable cost per unit Total fixed costs $ $ 30,200 units 22 17 $102,900 Division B, another division of the same company, would like to purchase 17,300 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $20 each. Suppose that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into sales to outside customers. If Division A refuses to accept the $20 price internally and Division B continues to buy from the outside supplier, the company as a whole will be:
7. Division X produces a single product for both Division Y and an external market. It has spare capacity to produce another 20,000 items. Additional details for Division X are as follows: Information for Division X Price of product sold to outside market Current transfer price Variable cost per item made in division Fixed costs per item (based on budget) Division Y has requested a further 5,000 items. £25 £20 £12 £6 What is the minimum price that Division X should ask per item? (a) £12 (b) £18 (c) £20 (d) £25