Required: 1. Calculate the net operating incomes earned by Division A, Division B, and the company as a whole. 2. Assume Division A's manufacturing capacity is 21,000 circuit boards. Next year, Division B wants to purchase 6,400 circuit boards from Division A rather than 5,400. (Circuit boards of this type are not available from outside sources.) From the standpoint of the company as a whole, should Division A sell the 1,000 additional circuit boards to Division B or continue selling them to outside customers?
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- Division A manufactures electronic circuit boards that can be sold to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: Selling price per circuit board Variable cost per circuit board Number of circuit boards: Produced during the year Sold to outside customers Sold to Division B $ 178 $ 122 21,300 15,500 5,800 Sales to Division B were at the same price as sales to outside customers. The circuit boards purchased by Division B were used in an electronic instrument manufactured by that division (one board per instrument). Division B incurred $200 in additional variable cost per instrument and then sold the instruments for $700 each. Required: 1. Calculate the net operating incomes earned by Division A, Division B, and the company as a whole. 2. Assume Division A's manufacturing capacity is 21,300 circuit boards. Next year, Division B wants to purchase 6,800 circuit boards from Division A rather than 5,800. (Circuit boards of…Division A manufactures electronic circuit boards that can be sold to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: Selling price per circuit board $ 190 Variable cost per circuit board $ 119 Number of circuit boards: Produced during the year Sold to outside customers Sold to Division B Sales to Division B were at the same price as sales to outside customers. The circuit boards purchased by Division B were used in an electronic instrument manufactured by that division (one board per instrument). Division B incurred $270 in additional variable cost per instrument and then sold the instruments for $660 each. Required: Calculate the net operating incomes earned by Division A, Division B, and the company as a whole. Assume Division A's manufacturing capacity is 21,500 circuit boards. Next year, Division B wants to purchase 7,600 circuit boards from Division A rather than 6,600. (Circuit boards of this type are not…Division A of XYZ Co. produces units that can either be sold to outside customers or transferred to XYZ's Division B. The following data are available from the last year: Division A Production capacity in units Selling price per unit to outside customers Variable cost per unit Total fixed production and selling costs 20,000 $25 $15 $80,000 Division B Number of units needed annually Price per unit paid to an outside supplier 4,000 $18 If the Division A can sell all 20,000 units annually to outside customers, what is the highest acceptable transfer price from Division B's standpoint on each of the 4,000 units? O A. $15 B. $18 O C. $19 D. $25
- The Parts Division of Ram Company produces units that can either be sold to outside customers or transferred to Ram’s Equipment Division. The following data are available from the last year: Parts Division: Production capacity in units 90,000 Selling price per unit to outside customers $60 Variable cost per unit $25 Fixed cost per unit at capacity $10 Equipment Division: Number of units needed annually 8,000 Price per unit paid to an outside supplier $40 1. From the Equipment Division’s standpoint, what is the highest acceptable transfer price for each of the 8,000 units? multiple choice 1 a)$40 b)$25 c)$60 d)$15 2. Assume the Parts Division sells only 80,000 units annually to outside customers. If 8,000 units are transferred internally at a transfer price of $35, what will be the gain or loss in potential profits for the company as a whole? multiple choice 2 a)$80,000 loss b)$120,000 loss c)$120,000 gain…Bedtime Bedding Company manufactures pillows. The Cover Division makes covers and the Assembly Division makes the finished products. The covers can be sold separately for $5.00. The pillows sell for $6.00. The information related to manufacturing for the most recent year is as follows: Cover Division manufacturing costs $6,000,000 Sales of covers by Cover Division 4,000,000 Market value of covers transferred to Assembly 6,000,000 Sales of pillows by Assembly Division 7,200,000 Additional manufacturing costs of Assembly Division 1,500,000 Compute the operating income for each division and the company as a whole. Use market value as the transfer price. Are all managers happy with this concept? ExplainA Chemical Company manufactures joint products Pep and Vim, and a by product Zest. Costs are assigned to the joint products by the market value method, which considers further processing costs in subsequent operations. For allocating cost to the by-product, the market value or reversal cost method is used. Total manufacturing costs for 10,000 units were P172,000 during the quarter. Production and cost data follow: Pep Vim Zest Unit Produced 5000 4000 1000 Sales price per unit 50 40 5 Further processing cost per unit 10 5 0 Selling and adm. Expense per unit 0 0 2 operating profit per unit 0 0 1 Required: The gross profit for pep is The value of Zest to deducted from the joint cost is
- The Trece Co. manufactures joint products X and Y as well as by-product Z. Cumulative costs data for the period show P204,000 representing 20,000 units completed processed through the Refining Department at an average cost of P10.20. Costs are assigned to X and Y by the market value method which considers further processing costs in subsequent operations. Additional data: Z X Y Quantity processed 2,000 units 8,000 units 10,000 units Sales price per unit P5 P20 P25 Further processing cost per unit 1 5 7 Marketing and administrative expense per unit 1 Operating profit per unit 1 Required: a. Assuming by-product value is material determine the joint cost allocated to Z using Net realizable value method and joint cost to X and Y. b. Assuming by-product value is immaterial and insignificant, what is the joint cost allocated to X and Y.The Blade Division of Dana Company produces hardened steel blades. Approximately one-third of the Blade Division's output is sold to the Lawn Products Division of Dana; the remainder is sold to outside customers. Blade Division's estimated sales and cost data for the year ending June 30th are as follows: Sales to Lawn Products Division Sales to Outsiders Revenue Variable costs Fixed costs Gross margin Unit sales $ 40,500 27,000 7,200 $ 6,300 27,000 $ 108,000 54,000 37,500 $ 16,500 54,000 The Lawn Products Division has an opportunity to purchase, on a continual basis, 27,000 blades (of identical quality) from an outside supplier, at a cost of $1.80 per unit. Assume that the Blade Division cannot sell any additional products to outside customers. Assume, too, that there are no short-term avoidable fixed costs. Based solely on short-term financial considerations, should Dana allow its Lawn Products Division to purchase the blades from the outside supplier, and why? Multiple Choice O No,…ElectronPlus manufactures and sells a unique electronic part. Operating results for the first three years of activity were as follows (absorption costing basis): Sales Cost of goods sold: Beginning inventory Add: cost of goods manufactured Goods available for sale Less: ending inventory Cost of goods sold Gross margin Selling and administrative expenses Operating income (loss) Production in units Sales in units. Year 1 $1,033,000 Year 1 59,000 59,000 $ 0 Year 2 69,000 49,000 Year 2 Year 3 $826,400 $1,033,000 Sales dropped by 20% during year 2 due to the entry of several foreign competitors into the market. ElectronPlus had expected sales to remain constant at 59,000 units for the year; production was set at 69,000 units in order to build a buffer against unexpected spurts in demand. By the start of year 3, management could see that spurts in demand were unlikely and that the inventory was excessive. To work off the excessive inventories, ElectronPlus cut back production during year 3,…
- The Trece Co. manufactures joint products X and Y as well as by-product Z. Cumulative costs data for the period show P204,000 representing 20,000 units completed processed through the Refining Department at an average cost of P10.20. Costs are assigned to X and Y by the market value method which considers further processing costs in subsequent operations.Additional data: Z X YQuantity processed 2,000 units 8,000 units 10,000 unitsSales price per unit P5 P20 P25Further processing cost per unit 1 5 7Marketing and administrativeexpense per unit 1Operating profit per unit 1 Required:a. Assuming by-product value is material determine the joint cost allocated to Z using Net realizable value method and joint cost to X and Y.b. Assuming by-product value is immaterial and insignificant,…Morrill Company produces two different types of gauges: a density gauge and a thickness gauge. The segmented income statement for a typical quarter follows. Includes depreciation. The density gauge uses a subassembly that is purchased from an external supplier for 25 per unit. Each quarter, 2,000 subassemblies are purchased. All units produced are sold, and there are no ending inventories of subassemblies. Morrill is considering making the subassembly rather than buying it. Unit-level variable manufacturing costs are as follows: No significant non-unit-level costs are incurred. Morrill is considering two alternatives to supply the productive capacity for the subassembly. 1. Lease the needed space and equipment at a cost of 27,000 per quarter for the space and 10,000 per quarter for a supervisor. There are no other fixed expenses. 2. Drop the thickness gauge. The equipment could be adapted with virtually no cost and the existing space utilized to produce the subassembly. The direct fixed expenses, including supervision, would be 38,000, 8,000 of which is depreciation on equipment. If the thickness gauge is dropped, sales of the density gauge will not be affected. Required: 1. Should Morrill Company make or buy the subassembly? If it makes the subassembly, which alternative should be chosen? Explain and provide supporting computations. 2. Suppose that dropping the thickness gauge will decrease sales of the density gauge by 10 percent. What effect does this have on the decision? 3. Assume that dropping the thickness gauge decreases sales of the density gauge by 10 percent and that 2,800 subassemblies are required per quarter. As before, assume that there are no ending inventories of subassemblies and that all units produced are sold. Assume also that the per-unit sales price and variable costs are the same as in Requirement 1. Include the leasing alternative in your consideration. Now, what is the correct decision?Roper Furniture manufactures office furniture and tracks cost data across their process. The following are some of the costs that they incur. Classify these costs as fixed or variable costs, and as product costs or period costs. Wood used to produce desks ($125,00 per desk) Production labor used to produce desks ($15 per hour) Production supervisor salary ($45,000 per year) Depreciation on factory equipment ($60,000 per year) Selling and administrative expenses ($45,000 per year) Rent on corporate office ($44,000 per year) Nails, glue, and other materials required to produce desks (varies per desk) Utilities expenses for production facility Sales staff commission (5% of gross sales)