The materials used by Hibiscus Company's Division A are currently purchased from an outside supplier at $52 per unit. Division B is able to supply Division A with 10,800 units at a variable cost of $47 per unit. The two divisions have recently negotiated a transfer price of $48 per unit for the 10,800 units. Enter an increase as a positive number and a decrease as a negative number. a. By how much will each division's income increase as a result of this transfer? Division A Division B b. What is the total increase in income for Hibiscus Company?

The materials used by Hibiscus Company's Division A are currently purchased from an outside supplier at $52 per unit. Division B is able to supply Division A with 10,800 units at a variable cost of $47 per unit. The two divisions have recently negotiated a transfer price of $48 per unit for the 10,800 units. Enter an increase as a positive number and a decrease as a negative number. a. By how much will each division's income increase as a result of this transfer? Division A Division B b. What is the total increase in income for Hibiscus Company?

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...

See similar textbooks

Similar questions

A company has prepared the following statistics regarding its production and sales at different capacity levels. Total costs: 1. At what point is break-even reached in sales dollars? In units? (Hint: Use the capacity level to determine the number of units.) 2. If the company is operating at 60% capacity, should it accept an offer from a customer to buy 10,000 units at 3 per unit?
Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of 1,350 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of 900 per unit. a. If a transfer price of 1,000 per unit is established and 75,000 units of materials are transferred, with no reduction in the Components Divisions current sales, how much would Ziegler Inc.s total operating income increase? b. How much would the Instrument Divisions operating income increase? c. How much would the Components Divisions operating income increase?
Using the information in the previous exercises about Marleys Manufacturing, determine the operating income for department B, assuming department A sold department B 1,000 units during the month and department A reduces the selling price to the market price.
Aldovar Company produces a variety of chemicals. One division makes reagents for laboratories. The divisions projected income statement for the coming year is: Required: 1. Compute the contribution margin per unit, and calculate the break-even point in units. (Note: Round answer to the nearest unit.) Calculate the contribution margin ratio and use it to calculate the break-even sales revenue. (Note: Round contribution margin ratio to four decimal places, and round the break-even sales revenue to the nearest dollar.) 2. The divisional manager has decided to increase the advertising budget by 250,000. This will increase sales revenues by 1 million. By how much will operating income increase or decrease as a result of this action? 3. Suppose sales revenues exceed the estimated amount on the income statement by 1,500,000. Without preparing a new income statement, by how much are profits underestimated? 4. Compute the margin of safety based on the original income statement. 5. Compute the degree of operating leverage based on the original income statement. If sales revenues are 8% greater than expected, what is the percentage increase in operating income? (Note: Round operating leverage to two decimal places.)
The materials used by Hibiscus Company Division A are currently purchased from outside supplier at $53 per unit. Division B is able to supply Division A with 12,400 units at a variable cost of $47 per unit. The two divisions have recently negotiated a transfer price of $48 per unit for the 12,400 units. (a) By how much will each division's income increase as a result of this transfer? Enter an increase as a positive number and a decrease as a negative number. Division A $fill in the blank 1 Division B $fill in the blank 2 (b) What is the total increase in income for Hibiscus Company? $fill in the blank 3
Materials used by Angela Bread Company in producing Division A's product are currently purchased from outside suppliers at a cost of $30 per unit. However, the same materials are available from Division B. Division B has unused capacity and can produce the materials needed by Division A at a variable cost of $20 per unit. 1. Assuming transfer price of $25, how much would the income from operations of Division B increase? 2. If the negotiated price approach is used, what would be the range of acceptable transfer prices?
Assume you are the department B manager for Marleys manufacturing. Marley’s operates under a cost-based transfer structure. Assume you receive the majority of your raw materials from department A, which sells only to department B (they have no outside sales) Assume the market price for the items your department purchase is 15% below what you are being charged by department A of Marley’s manufacturing. Determine the operating income for department B, assuming department A “sold” department B 1,000 unit during the month and department A reduced the selling price to the market price. Round your percentage answer to one decimal.
Division A makes a part with the following characteristics: Production capacity in units- 15,000 units Selling price to outside customers- $25 Variable cost per unit- $18 Total fixed costs- $60,000 Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division A is currently selling 10,000 units to its outside customers. What should be the lowest acceptable transfer price from the perspective of Division A?
Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $13. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost-based transfer price? Variable cost per unit $6.31 Fixed cost per unit 1.36 Division B sales price of Component X 14.5
Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $13. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the full-cost-based transfer price? Variable cost per unit $7.89 Fixed cost per unit 1.48 Division B sales price of Component X 14.5
Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $12. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost-based transfer price? Variable cost per unit $7.48 • Fixed cost per unit 1.97 • Division B sales price of Component X 14.50
Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $14. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the full-cost plus assuming 15% transfer price? Variable cost per unit $7.16 Fixed cost per unit 1.14 Division B sales price of Component X 14.5