Please do not give solution in image format thanku Aulman Inc. has a number of divisions, including a Furniture Division and a MotelDivision. The Motel Division owns and operates a line of budget motels located alongmajor highways. Each year, the Motel Division purchases furniture for the motel rooms.Currently, it purchases a basic dresser from an outside supplier for $40. The manager ofthe Furniture Division has approached the manager of the Motel Division about sellingdressers to the Motel Division. The full product cost of a dresser is $29. The FurnitureDivision can sell all of the dressers it makes to outside companies for $40. The MotelDivision needs 10,000 dressers per year; the Furniture Division can make up to 50,000dressers per year. Also, assume that the company policy is that all transfer prices arenegotiated by the divisions involved.Required:1. What is the maximum transfer price?$Which division sets it?Motel Division2. What is the minimum transfer price?$Which division sets it?Furniture Division3. Conceptual Connection: If the transfer takes place, what will be the transfer price?

Transfer price concept arises when two or more interrelated companies, enterprises or departments…

negotiated by the divisions involved. Required: 1. What is the maximum transfer price? Which division sets it? Motel Division ✓ 2. What is the minimum transfer price? Which division sets it? Furniture Division

negotiated by the divisions involved. Required: 1. What is the maximum transfer price? Which division sets it? Motel Division ✓ 2. What is the minimum transfer price? Which division sets it? Furniture Division

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Aulman Inc. has a number of divisions including a Furniture Division and a Motel Division. The Motel Division owns and operates a line of budget motels located along major highways. Each year, the Motel Division purchases furniture for the motel rooms. Currently, it purchases a basic dresser from an outside supplier for $60. The manager of the Furniture Division has approached the manager of the Motel Division about selling dressers to the Motel Division. The full product cost of a dresser is $29. While the Furniture Division has been operating at capacity (50,000 dressers per year) and selling them for $60 each, it expects to produce and sell only 40,000 dressers for $60 each next year. The Furniture Division incurs variable costs of $16 per dresser. The Motel Division needs 10,000 dressers per year; the Furniture Division can make up to 50,000 dressers per year. The company policy is that all transfer prices are negotiated by the divisions involved. Required: 1. What is the maximum…
Aulman Inc. has a number of divisions including a Furniture Division and a Motel Division. The Motel Division owns and operates a line of budget motels located along major highways. Each year, the Motel Division purchases furniture for the motel rooms. Currently, it purchases a basic dresser from an outside supplier for $60. The manager of the Furniture Division has approached the manager of the Motel Division about selling dressers to the Motel Division. The full product cost of a dresser is $29. While the Furniture Division has been operating at capacity (50,000 dressers per year) and selling them for $60 each, it expects to produce and sell only 40,000 dressers for $60 each next year. The Furniture Division incurs variable costs of $16 per dresser. The Motel Division needs 10,000 dressers per year; the Furniture Division can make up to 50,000 dressers per year. The company policy is that all transfer prices are negotiated by the divisions involved. Required: 1. What is the maximum…
Aulman Inc. has a number of divisions, including a Furniture Division and a Motel Division. The Motel Division owns and operates a line of budget motels located along major highways. Each year, the Motel Division purchases furniture for the motel rooms. Currently, it purchases a basic dresser from an outside supplier for $40. The manager of the Furniture Division has approached the manager of the Motel Division about selling dressers to the Motel Division. The full product cost of a dresser is $29. The Furniture Division can sell all of the dressers it makes to outside companies for $40. The Motel Division needs 10,000 dressers per year; the Furniture Division can make up to 50,000 dressers per year. Required: 1. Which division sets the maximum transfer price? Which division sets the minimum transfer price? The maximum transfer price The minimum transfer price 2. Suppose the company policy is that all transfers take place at full cost. What is the transfer price? 3.…
Aulman Inc. has a number of divisions, including a Furniture Division and a Motel Division. The Motel Division owns and operates a line of budget motels located along major highways. Each year, the Motel Division purchases furniture for the motel rooms. Currently, it purchases a basic dresser from an outside supplier for $40. The manager of the Furniture Division has approached the manager of the Motel Division about selling dressers to the Motel Division. The full product cost of a dresser is $29. The Furniture Division can sell all of the dressers it makes to outside companies for $40. The Motel Division needs 10,000 dressers per year; the Furniture Division can make up to 50,000 dressers per year. Also, assume that the company policy is that all transfer prices are negotiated by the divisions involved. Required: 1. What is the maximum transfer price? Which division sets it? 2. What is the minimum transfer price? Which division sets it? 3. Conceptual Connection: If the…
Bostonian Inc. has a number of divisions, including the Delta Division and the Listen Now Division. The Listen Now Division owns and operates a line of MP3 players. Each year, the Listen Now Division purchases component AZ in order to manufacture the MP3 players. Currently, it purchases this component from an outside supplier for $6.50 per component. The manager of the Delta Division has approached the manager of the Listen Now Division about selling component AZ to the Listen Now Division. The full product cost of component AZ is $3.10. The Delta Division can sell all of the component AZs it makes to outside companies for $6.50. The Listen Now Division needs 18,000 component AZs per year; the Delta Division can make up to 60,000 components per year. Required: A. Which division sets the maximum transfer price? Which division sets the minimum transfer price? Maximum Minimum B. Suppose the company policy is that all transfer take place at full cost. What is the transfer…
Speed Racer in Victoria makes bicycles for people of all ages. The frames division makes and paints the frames and supplies them to the assembly division where the bicycles are assembled. Speed Racer is a successful and profitable corporation that attributes much of its success to its decentralized operating style. Each division manager is compensated on the basis of division operating income. The assembly division currently acquires all its frames from the frames division. The assembly division manager could purchase similar frames in the market for $480. The frames division is currently operating at 80% of its capacity of 4,000 frames (units) and has the following details: Voltage Regulator Direct materials ($150 per unit x 320 units) $480,000 Direct manufacturing labour ($60 per unit x 3,200 units) 192,000 Variable manufacturing overhead costs ($30 per unit × 3,200 units) 96,000 Fixed manufacturing overhead costs $624,000 All the frames…
Speed Racer in Victoria makes bicycles for people of all ages. The frames division makes and paints the frames and supplies them to the assembly division where the bicycles are assembled. Speed Racer is a successful and profitable corporation that attributes much of its success to its decentralized operating style. Each division manager is compensated on the basis of division operating income. The assembly division currently acquires all its frames from the frames division. The assembly division manager could purchase similar frames in the market for $480. The frames division is currently operating at 80% of its capacity of 4,000 frames (units) and has the following details: Voltage Regulator Direct materials ($150 per unit x 320 units) $480,000 Direct manufacturing labour ($60 per unit x 3,200 units) 192,000 Variable manufacturing overhead costs ($30 per unit × 3,200 units) 96,000 Fixed manufacturing overhead costs $624,000 All the frames division’s…
Speed Racer in Victoria makes bicycles for people of all ages. The frames division makes and paints the frames and supplies them to the assembly division where the bicycles are assembled. Speed Racer is a successful and profitable corporation that attributes much of its success to its decentralized operating style. Each division manager is compensated on the basis of division operating income. The assembly division currently acquires all its frames from the frames division. The assembly division manager could purchase similar frames in the market for $480. The frames division is currently operating at 80% of its capacity of 4,000 frames (units) and has the following details: Voltage Regulator Direct materials ($150 per unit x 320 units) $480,000 Direct manufacturing labour ($60 per unit x 3,200 units) 192,000 Variable manufacturing overhead costs ($30 per unit × 3,200 units) 96,000 Fixed manufacturing overhead costs $624,000 All the frames division’s…
Speed Racer in Victoria makes bicycles for people of all ages. The frames division makes and paints the frames and supplies them to the assembly division where the bicycles are assembled. Speed Racer is a successful and profitable corporation that attributes much of its success to its decentralized operating style. Each division manager is compensated on the basis of division operating income. The assembly division currently acquires all its frames from the frames division. The assembly division manager could purchase similar frames in the market for $480. The frames division is currently operating at 80% of its capacity of 4,000 frames (units) and has the following details: Voltage Regulator Direct materials ($150 per unit x 320 units) $480,000 Direct manufacturing labour ($60 per unit x 3,200 units) 192,000 Variable manufacturing overhead costs ($30 per unit × 3,200 units) 96,000 Fixed manufacturing overhead costs $624,000 All the frames division’s…
Speed Racer in Victoria makes bicycles for people of all ages. The frames division makes and paints the frames and supplies them to the assembly division where the bicycles are assembled. Speed Racer is a successful and profitable corporation that attributes much of its success to its decentralized operating style. Each division manager is compensated on the basis of division operating income. The assembly division currently acquires all its frames from the frames division. The assembly division manager could purchase similar frames in the market for $480. The frames division is currently operating at 80% of its capacity of 4,000 frames (units) and has the following details: Voltage Regulator Direct materials ($150 per unit x 320 units) $480,000 Direct manufacturing labour ($60 per unit x 3,200 units) 192,000 Variable manufacturing overhead costs ($30 per unit × 3,200 units) 96,000 Fixed manufacturing overhead costs $624,000 All the frames…
Crede Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $10.10 from an outside vendor. Division A needs 11,100 lamps for the coming year. Division B has the capacity to manufacture 49,600 lamps annually. Sales to outside customers are estimated at 38,500 lamps for the next year. Reading lamps are sold at $12.09 each. Variable costs are $6.87 per lamp and include $1.41 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $75,900. Consider the following independent situations. What should be the minimum transfer price accepted by Division B for the 11,100 lamps and the maximum transfer price paid by Division A? (Round answers to 2 decimal places, e.g. 15.25.) Per unit Minimum transfer price accepted by Division B $_ Maximum transfer…
Blue Spruce Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $10 from an outside vendor. Division A needs 8,200 lamps for the coming year. Division B has the capacity to manufacture 41,000 lamps annually. Sales to outside customers are estimated at 32,800 lamps for the next year. Reading lamps are sold at $12 each. Variable costs are $7 per lamp and include $1 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $65,600. Consider the following independent situations. (a) What should be the minimum transfer price accepted by Division B for the 8,200 lamps and the maximum transfer price paid by Division A? Minimum transfer price accepted by Division B Maximum transfer price paid by Division A $ $ per unit per unit