When June and Jerry started their business, Kingbird Inc., their mission was simple: to provide a quiet, round-trip ride to hundreds ofoffice workers so they could work during the commute. At the beginning, they had enough capacity to accommodate all interestedcustomers. But as this idea gained popularity, there was demand they couldn't meet-and not just by commuters, but also by travelersheading to and from the airport.June and Jerry organized their growing business into geographical segments, evaluating each on its operating income and profitmargin. The two owners retained control of asset purchases. June and Jerry still intended for their segment managers to worktogether, helping each other with capacity needs when required. Such participation was left up to the segment managers, though. Allthree segments had the same variable and absorption cost for an average two-way trip, at $16 and $24 per customer, respectively.Since the culture in this company was very open, each manager was aware of the other segments' similar cost structures.The Airport segment's drivers were already prebooked for the upcoming holiday weekend, and there was a steady stream of callscoming in with more requests for this service. Naturally, the Airport segment manager called on both the Hawthorn and Boltonsegments to ask for help. Hawthorn had some capacity, but Bolton was prebooked with its own repeat customers.Listed below are the average rates to provide two-way transportation services to one person or two people (rate was the same) ineach geographic area.Average market price(a)Transfer priceHawthorn Bolton Airport$57$80If you managed the Hawthorn segment and had some available capacity, how much would you want to charge the Airportsegment for taking on this additional work?$$55per trip

Transfer price:Transfer price is a price where a company sells its goods or services within the…

Answered: If you managed the Hawthorn segment and…

If you managed the Hawthorn segment and had some available capacity, how much would you want to charge the Airport segment for taking on this additional work? Transfer price $ per trip

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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