Division Y has asked Division X of the same company to supply it with 9,000 units of part L763 this year to use in one of its products.Division Y has received a bid from an outside supplier for the parts at a price of $53 per unit. Division X has the capacity to produce36,000 units of part L763 per year. Division X expects to sell 32,400 units of part L763 to outside customers this year at a price of$58.00 per unit. To fill the order from Division Y, Division X would have to cut back its sales to outside customers. Division X producespart L763 at a varlable cost of $45 per unit. The cost of packing and shipping the parts for outside customers is $2 per unit. Thesepacking and shipping costs would not have to be incurred on sales of the parts to Division Y.Required:a. What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of9,000 parts this year from Division X to Division Y? (Round your final answers to 2 decimal places.)Range of transfer prices:< Transfer price<b. Is it in the best interests of the overall company for this transfer to take place?O YesNo

The value attached to the commodities or services moved between related parties is known as transfer…

Division Y has asked Division X of the same company to supply it with 9,000 units of part L763 this year to use in one of its products. Division Y has received a bid from an outside supplier for the parts at a price of $53 per unit. Division X has the capacity to produce 36.000 units of part L763 per year. Division X expects to sell 32,400 units of part L763 to outside customers this year at a price of $58.00 per unit. To fill the order from Division Y, Division X would have to cut back its sales to outside customers. Division X produce part L763 at a variable cost of $45 per unit. The cost of packing and shipping the parts for outside customers is $2 per unit. These packing and shipping costs would not have to be incurred on sales of the parts to Division Y. Required: a. What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of 9,000 parts this year from Division X to Division Y? (Round your final answers to 2 decimal places.) Range of transfer prices: < Transfer price < b. Is it in the best interests of the overall company for this transfer to take place?

Division Y has asked Division X of the same company to supply it with 9,000 units of part L763 this year to use in one of its products. Division Y has received a bid from an outside supplier for the parts at a price of $53 per unit. Division X has the capacity to produce 36.000 units of part L763 per year. Division X expects to sell 32,400 units of part L763 to outside customers this year at a price of $58.00 per unit. To fill the order from Division Y, Division X would have to cut back its sales to outside customers. Division X produce part L763 at a variable cost of $45 per unit. The cost of packing and shipping the parts for outside customers is $2 per unit. These packing and shipping costs would not have to be incurred on sales of the parts to Division Y. Required: a. What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of 9,000 parts this year from Division X to Division Y? (Round your final answers to 2 decimal places.) Range of transfer prices: < Transfer price < b. Is it in the best interests of the overall company for this transfer to take place?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Division Y has asked Division X of the same company to supply it with 9,000 units of part L763 this year to use in one of its products. Division Y has received a bid from an outside supplier for the parts at a price of $53 per unit. Division X has the capacity to produce 36,000 units of part L763 per year. Division X expects to sell 32,400 units of part L763 to outside customers this year at a price of $58.00 per unit. To fill the order from Division Y, Division X would have to cut back its sales to outside customers. Division X produces part L763 at a variable cost of $45 per unit. The cost of packing and shipping the parts for outside customers is $2 per unit. These packing and shipping costs would not have to be incurred on sales of the parts to Division Y Required: a. What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of 9,000 parts this year from Division X to Division Y? Note: Round your final…
Division Y has asked Division X of the same company to supply it with 5,600 units of part L763 this year to use in one of its products. Division Y has received a bid from an outside supplier for the parts at a price of $36 per unit. Division X has the capacity to produce 22,400 units of part L763 per year. Division X expects to sell 20,160 units of part L763 to outside customers this year at a price of $37.60 per unit. To fill the order from Division Y, Division X would have to cut back its sales to outside customers. Division X produces part L763 at a variable cost of $28 per unit. The cost of packing and shipping the parts for outside customers is $2 per unit. These packing and shipping costs would not have to be incurred on sales of the parts to Division Y. Required: a. What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of 5,600 parts this year from Division X to Division Y? (Round your final answers…
Division G has asked Division F of the same company to supply it with 5,000 units of part WD26 this year to use in one of its products. Division G has received a bid from an outside supplier for the parts at a price of $19.00 per unit. Division F has the capacity to produce 25,000 units of part WD26 per year. Division F expects to sell 21,000 units of part WD26 to outside customers this year at a price of $18.00 per unit. To fill the order from Division G, Division F would have to cut back its sales to outside customers. Division F produces part WD26 at a variable cost of $12.00 per unit. The cost of packing and shipping the parts for outside customers is $2.00 per unit. These packing and shipping costs would not have to be incurred on sales of the parts to Division G. 1.What is the lowest price the F Division should charge for the internal transfers of its goods? 2.What is the highest price the G Division should charge for the internal transfers of its goods?
Western Jeans Co. has an annual plant capacity of 2,000,000 units, and current production is 1,920,000 units. Monthly fixed costs are $400,000, and variable costs are $9 per unit. The present selling price is $15 per unit. On July 6 of the current year, the company received an offer from Childs Company for 50,000 units of the product at $13 each. Childs Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Western Jeans Co. Question Content Area a. Prepare a differential analysis dated July 6 on whether to reject (Alternative 1) or accept (Alternative 2) the Childs order. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential AnalysisReject (Alt. 1) or Accept (Alt. 2) OrderJuly 6 Line Item Description Reject Order(Alternative 1) Accept Order(Alternative 2) Differential Effects(Alternative 2) Revenues $Revenues…
Solar Shade Inc. currently sells 40,000 basic solar shade devices per year at $60,000 each, and 16,800 custom-made solar shade devices per year at $150,000 each. The company wants to introduce a new portable solar shade to fill out its product line; it hopes to sell 26,000 of these per year at $16,000 each. An independent consultant has determined that if the company introduces the new solar shades, it should boost the sales of its basic solar shades by 6,000 units per year, and reduce the sales of custom-made solar shades by 1,200 units per year. What is the amount to use as the annual sales figure when evaluating this project?
Homestead Jeans Co. has an annual plant capacity of 65,000 units, and current production is 45,000 units. Monthly fixed costs are $54,000, and variable costs are $29 per unit. The present selling price is $42 per unit. On November 12 of the current year, the company received an offer from Dawkins Company for 18,000 units of the product at $32 each. Dawkins Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Homestead Jeans Co. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places.$
Markland Manufacturing manufactures desk lamps intends to increase capacity by obtaining new equipment. Two vendors have presented proposals. The purchase cost for proposal A is $30,000, and for proposal B, $80,000. Each proposal will produce lamps of the same quality. Proposal A is expected to produce lamps at $15.00/lamp, while proposal B is significantly more efficient and will produce them at $10.00/lamp. The revenue generated by the sale of each lamp is $20.00/unit. A. What is the point of indifference?B. The manufacturer expects to sell 12,000 lamps and has informed the vendors that it has chosen proposal B. The vendor of proposal A has offered to re-negotiate the purchase price of its proposal in order to win the contract. What purchase price will cause the manufacturerto reconsider its decision?
The Waygate Corporation is interested in contracting out a testing function.Two firms have submitted bids. Waygate believes that both companies will be able to deliver equivalent services for the 5-year period. Determine which one Waygate should choose if the corporate MARR (investment market rate) is 25% and price inflation is assumed to be 3.5% per year over the next 5 years. Company Alpha costs: Costs will be $150,000 in year-1 dollars the first year and will increase at a rate of 5% over the 5-year period. Company Beta costs: Costs will be a constant $150,000 per year in terms of today’s dollars over the 5-year period.
Perennial Company, a manufacturer of decorative pots, expects sales of 500,000 pots at $10 each during the coming year. Variable manufacturing costs are $4 per unit and fixed manufacturing costs are $2.50 per unit. The company received a special order from an overseas customer to purchase 50,000 pots at $6 each. The company has sufficient plant capacity to manufacture this order. However, additional overtime labor costs of $1.00 per pot would be required to produce the pots. No other costs would be incurred as a result of accepting the order. If the special order is accepted, how will operating profit be impacted?
Hahn Manufacturing purchases a key component of one of its products from a local supplier. The current purchase price is $1,500 per unit. Efforts to standardize parts succeeded to the point that this same component can now be used in five different products. Annual component usage should increase from 150 to 750 units. Management wonders whether it is time to make the component in-house rather than to continue buying it from the supplier. Fixed costs would increase by about $40,000 per year for the new equipment and tooling needed. The cost of raw materials and variable overhead would be about $1,100 per unit, and labor costs would be $300 per unit produced. so Should Hahn make rather than buy?
The Nature and Wildlife Corporation has manufacturing facilities in country A and an assembly plant in country B. In June 2020, the company will ship 1,000 units with a production cost of $65 per unit to its plant in country B. Its operating expenses in country A are $15,000 for the month. The income tax rate in country A is 20% and in country B it is 40%. The company plans to have a transfer price of $100 per unit. The final product can be sold in country B for $140. Country B’s operating expenses are $10,000 during the month. How much will the combined profits of the two operations be in April 2021?
The Nature and Wildlife Corporation has manufacturing facilities in country A and an assembly plant in country B. In June 2020, the company will ship 1,000 units with a production cost of $65 per unit to its plant in country B. Its operating expenses in country A are $15,000 for the month. The income tax rate in country A is 20% and in country B it is 40%. The company plans to have a transfer price of $100 per unit. The final product can be sold in country B for $140. Country B’s operating expenses are $10,000 during the month. Suppose the income tax rate in country A is 40% while in country B it is 20%. What will the combined profit be if all of the other numbers are the same as they were in the original assignment description? What would be the result in question 3 if the company decreased its transfer price to $90?