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_____ 1. If Moonton Company instructed Northern Vale Division to supply Iron Hooks to Mooniyan Division, how
much is the maximum transfer price that they can consider? (Round off your final answer to 3 decimal
places)
_____ 2. Continuing from Question No.1, how much is the minimum transfer price that they can consider?
(Round off your final answer to 3 decimal places)
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- Easy Fit Ltd. manufactures heating, ventilation, and air conditioning (HVAC) equipment. The Manufacturing Division creates parts; and, the Assembly Division builds and sells the equipment. The Manufacturing Division "sells" furnace parts packages to the Assembly Division. The market price for the Assembly Division to purchase a mini furnace is $3,500. The fixed costs for the Manufacturing Division are assumed to be the same over the range of 2,000-5,000 units. The fixed costs for the Assembly Division are assumed to be $40.00 per unit at 5,000 units. Manufacturing costs per furnace are: $1,300.00 $350.00 $100.00 Direct materials Direct labour Variable overhead Division fixed costs $90.00 Assembly's costs per completed furnace are: $25.00 $150.00 $50.00 $40.00 Direct materials Direct labour Variable overhead Division fixed costs If the Assembly Division sells 1,000 furnaces at a price of $3,500 per unit to customers, what is the company's operating income? $1,660,000 $3,250,000 $175,000…Quest Motors, Inc., operates as a decentralized multidivision company. The Vivo division of Quest Motors purchases most of its airbags from the airbag division. The airbag division’s incremental cost for manufacturing the airbags is $90 per unit. The airbag division is currently working at 80% of capacity. The current market price of the airbags is $125 per unit. Q. Suppose that Quest Motors requires that whenever divisions with unused capacity sell products internally, they must do so at the incremental cost. Evaluate this transfer-pricing policy using the criteria of goal congruence, evaluating division performance, motivating management effort, and preserving division autonomyGermano Products, Incorporated, has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below: Capacity in units 72,500 Selling price to outside customers $ 79 Variable cost per unit $ 28 Fixed cost per unit (based on capacity) $ 32 The Pool Products Division is currently purchasing 17,000 of these pumps per year from an overseas supplier at a cost of $74 per pump. Assume that the Pump Division is selling all of the pumps it can produce to outside customers. Does there exist a transfer price that would make both the Pump and Pool Products Division financially better off than if the Pool Products Division were to continue buying its pumps from the outside supplier?
- he materials used by the Multinomah Division of Dolan Company are currently purchased from outside suppliers at $42 per unit. These same materials are produced by the Pembroke Division. The Pembroke Division can produce the materials needed by the Multinomah Division at a variable cost of $28 per unit. The division is currently producing 120,000 units and has capacity of 180,000 units. The two divisions have recently negotiated a transfer price of $36 per unit for 24,000 units. By how much will each division's income increase as a result of this transfer?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…Owly Corporation’s agriculture division currently produces their own soil mix to grow the plants they sell in. Owly currently makes 200,000 cubic meters of soil mix a year. Each cubic meter of soil mix has direct labour costs of $1.50, direct material costs of $3.15, variable overhead costs of $0.75, and fixed overhead costs of $0.70 for a total cost of $6.10 per cubic meter. An outside supplier has offered to sell Owly soil mix for $5.75 per cubic meter. If Owly purchases the soil mix, 25% of the fixed manufacturing overhead will be eliminated, the remaining 75% will still exist.A. What is the net dollar advantage (disadvantage) of purchasing the soil mix rather than making it?B. What is the maximum amount Owly is willing to pay an outside supplier per cubic meter (to the cent) for the soil mix if the supplier commits to supplying all 200,000 cubic meters?C. After one month of greenhouse growing time Owly can produce 100,000 four inch pot basil plants that can be sold for $2.20 each.…
- Cascade Containers is organized into two divisions-Manufacturing and Distribution. Manufacturing produces a product that can be sold immediately or transferred to Distribution for further processing and then sold. Distribution only buys from Manufacturing for quality control reasons. Manufacturing currently sells 2,400 units annually at a price of $600 per unit to outside customers. It sells an additional 1,200 units to Distribution. The unit variable cost in Manufacturing is $300 and annual fixed costs are $300,000. Manufacturing is located in a country with a 20 percent tax rate. Distribution can sell units that have had further processing for $1,200 each. In addition to what it pays Manufacturing, the variable costs in Distribution are $150 per unit. Annual fixed costs in Distribution are $360,000. Distribution is located in a country with a 10 percent tax rate. Required: a. Suppose Manufacturing would have excess capacity even with the demand from Distribution. Ignoring tax…The materials used by the Multinomah Division of Isbister Company are currently purchased from outside suppliers at $90 per unit. These same materials are produced by the Pembroke Division. The Pembroke Division can produce the materials needed by the Multinomah Division at a variable cost of $75 per unit. The division is currently producing 120,000 units and has capacity of 150,000 units. The two divisions have recently negotiated a transfer price of $82 per unit for 15,000 units. A. By how much will the Pembroke Division's income increase as a result of this transfer? B. By how much will the Multinomah Division's income increase as a result of this transfer?The materials used by the Multinomah Division of Isbister Company are currently purchased from outside suppliers at $120 per unit. These same materials are produced by the Pembroke Division. The Pembroke Division can produce the materials needed by the Multinomah Division at a variable cost of $60 per unit. The division is currently producing 161,000 units and has capacity of 230,000 units. The two divisions have recently negotiated a transfer price of $85 per unit for 69,000 units. By how much will each division's income increase as a result of this transfer? Pembroke Division $fill in the blank 1 Multinomah Division $fill in the blank 2
- Wetherald Products, Incorporated, has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below: Capacity in units 55,000 Selling price to outside customers $ 82 Variable cost per unit $53 Fixed cost per unit (based on capacity) $11 The Pool Products Division is currently purchasing 4,000 of these pumps per year from an overseas supplier at a cost of $74 per pump. Assume that the Pump Division has enough idle capacity to handle all of the Pool Products Division's needs. What should be the minimum acceptable transfer price for the pumps from the standpoint of the Pump Division? Multiple Choice $74 per unit $53 per unit $64 per unit $82 per unitHarcourt Manufacturing (HM) has the capacity to produce 11,800 fax machines per year. HM currently produces and sells 8,800 units per year. The fax machines normally sell for $280 each. Modem Products has offered to buy 3,800 fax machines from HM for $150 each. Unit-level costs associated with manufacturing the fax machines are $51 each for direct labor and $76 each for direct materials. Product-level and facility-level costs are $68,000 and $83,000, respectively. How much would profit increase (decrease) if HM accepted this special order?Thompson Industrial Products Inc. (TIPI) is a diversified industrial-cleaner processing company. The company’s Dargan plant produces two products: a table cleaner and a floor cleaner from a common set of chemical inputs (CDG). Each week, 900,000 ounces of chemical input are processed at a cost of $210,000 into 600,000 ounces of floor cleaner and 300,000 ounces of table cleaner. The floor cleaner has no market value until it is converted into a polish with the trade name FloorShine. The additional processing costs for this conversion amount to $240,000.FloorShine sells at $20 per 30-ounce bottle. The table cleaner can be sold for $17 per 25-ounce bottle. However, the table cleaner can be converted into two other products by adding 300,000 ounces of another compound (TCP) to the 300,000 ounces of table cleaner. This joint process will yield 300,000 ounces each of table stain remover (TSR) and table polish (TP). The additional processing costs for this process amount to $100,000. Both…