Transfer Prices at Full Cost with Excess Capacity: Divisional Viewpoint Karakomi Cameras Inc. has a Disposables Division that produces a camera that sells for $10 per unit in the open market. The cost of the product is $5.50 (variable manufacturing of $3.00, and fixed manufacturing of $2.50). Total fixed manufacturing costs are $100,000 at the normal annual production volume of 40,000 units. The Overseas Division has offered to buy 10,000 units at the full cost of $5.50. The Disposables Division has excess capacity, and the 10,000 units can be produced without interfering with the current outside sales of 40,000 units. The total fixed cost of the Disposables Division will not change. Explain whether the Disposables Division should accept or reject the offer. Show calculations. Compute net income at normal annual production volume. Do not use a negative sign with your answers. Karakomi Cameras Inc. Disposables Division Unit Margins Current Sales Sales Variables costs Contribution margin Fixed costs: Net income $ Per Unit $ Total
Transfer Prices at Full Cost with Excess Capacity: Divisional Viewpoint Karakomi Cameras Inc. has a Disposables Division that produces a camera that sells for $10 per unit in the open market. The cost of the product is $5.50 (variable manufacturing of $3.00, and fixed manufacturing of $2.50). Total fixed manufacturing costs are $100,000 at the normal annual production volume of 40,000 units. The Overseas Division has offered to buy 10,000 units at the full cost of $5.50. The Disposables Division has excess capacity, and the 10,000 units can be produced without interfering with the current outside sales of 40,000 units. The total fixed cost of the Disposables Division will not change. Explain whether the Disposables Division should accept or reject the offer. Show calculations. Compute net income at normal annual production volume. Do not use a negative sign with your answers. Karakomi Cameras Inc. Disposables Division Unit Margins Current Sales Sales Variables costs Contribution margin Fixed costs: Net income $ Per Unit $ Total
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 17E: Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside...
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
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.Recommended textbooks for you
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
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
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning