[The following information applies to the questions displayed below.)In each of the cases below, assume Division X has a product that can be sold to outside customers or to Division Y of thesame company. The managers of the divisions are evaluated based on their divisional profits.CaseABDivision X:Capacity in units106,000Variable costs per unitNumber of units being sold to outside customersSelling price per unit to outside customers95,000106,00072,000$ 58$ 26$ 24$ 16Fixed costs per unit (based on capacity)$ 8$ 4Division Y:Number of units needed for production23,00023,000Purchase price per unit now being paid to an outsidesupplier$ 52$ 32Exercise 11-13 (Algo) Part 1Required:1. Refer to the data in case A above. Assume in this case $2 per unit in variable selling costs can be avoided on intracompany sales.a. What is the lowest acceptable transfer price from the perspective of the selling division?b. What is the highest acceptable transfer price from the perspective of the buying division?c. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and makedecisions on their own, will a transfer probably take place?Che

Step 1: 1) Assuming that $2 per unit is variable selling costs can be avoided on intracompany sales…

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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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In each of the cases below, assume Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits. Division X: Capacity in units Number of units being sold to outside customers Selling price per unit to outside customers Variable costs per unit Fixed costs per unit (based on capacity) Division Y: Number of units needed for production Purchase price per unit now being paid to an outside supplier Exercise 11-13 (Algo) Part 1 Complete this question by entering your answers in the tabs below. Req 1A A Req 1B Case Req 1C 110,000 110,000 $50 $25 $ 8 24,000 $43 Required: 1. Refer to the data in case A above. Assume in this case that $2 per unit in variable selling costs can be avoided on intracompany sales. B 107,000 83,000 $28 $19 $5 a. What is the lowest acceptable transfer price from the perspective of the selling division? b. What is…
In each of the cases below, assume that Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits: Case A B Division X: Capacity in units 100,000 100,000 Number of units being sold to outside customers 100,000 80,000 Selling price per unit to outside customers $50 $35 Variable costs per unit $30 $20 Fixed costs per unit (based on capacity) $8 $6 Division Y: Number of units needed for production 20,000 20,000 Purchase price per unit now being paid to an outside supplier $47 $34 Required:1-a. Refer to the data in case A above. Assume that $2 per unit in variable selling costs can be avoided on intracompany sales. Determine the transfer price of the selling division. 1-b. If the managers are free to negotiate and make decisions on their own, will a transfer take place? multiple…
n each of the cases below, assume that Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits: Case A B Division X: Capacity in units 140,000 140,000 Number of units being sold to outside customers 140,000 115,000 Selling price per unit to outside customers $ 54 $ 38 Variable costs per unit $ 34 $ 20 Fixed costs per unit (based on capacity) $ 12 $ 10 Division Y: Number of units needed for production 25,000 25,000 Purchase price per unit now being paid to an outside supplier $ 50 $ 37 Required:1-a. Refer to the data in case A above. Assume that $3 per unit in variable selling costs can be avoided on intracompany sales. Determine the transfer price of the selling division. 1-b. If the managers are free to negotiate and make decisions on their own, will…
In each of the cases below, assume that Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits: Division X: Capacity in units Number of units being sold to outside customers Selling price per unit to outside customers Variable costs per unit Fixed costs per unit (based on capacity) Division Y: Number of units needed for production Purchase price per unit now being paid to an outside supplier Transfer price A Yes No 100,000 100,000 1-b. If the managers are free to negotiate and make decisions on their own, will a transfer take place? Transfer price $50 $30 $8 20,000 $47 Case B Required: 1-a. Refer to the data in case A above. Assume that $2 per unit in variable selling costs can be avoided on intracompany sales. Determine the transfer price of the selling division. 100,000 80,000 $35 $20 $6 20,000 $34 2-a. Refer to the data…
In each of the cases below, assume that Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits: Division X: Capacity in units Number of units being sold to outside customers Selling price per unit to outside customers Variable costs per unit Fixed costs per unit (based on capacity) Division Y: Number of units needed for production Purchase price per unit now being paid to an outside supplier Case A B 100,000 100,000 100,000 80,000 $50 $35 $30 $20 $8 $6 20,000 $47 20,000 $34 Required: 1-a. Refer to the data in case A above. Assume that $2 per unit in variable selling costs can be avoided on intracompany sales. Determine the transfer price of the selling division. Transfer price 1-b. If the managers are free to negotiate and make decisions on their own, will a transfer take place? Yes No 2-a. Refer to the data in case B…
Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their own division’s return on investment (ROI). Assume the following information relative to the two divisions: Case 1 2 3 4 Alpha Division: Capacity in units 54,000 316,000 107,000 203,000 Number of units now being sold tooutside customers 54,000 316,000 82,000 203,000 Selling price per unit to outsidecustomers $ 99 $ 40 $ 65 $ 46 Variable costs per unit $ 61 $ 17 $ 38 $ 32 Fixed costs per unit (based oncapacity) $ 25 $ 9 $ 23 $ 8 Beta Division: Number of units needed annually 9,900 69,000 18,000 64,000 Purchase price now being paid toan outside supplier $ 90 $ 38 $ 65 * — *Before any purchase discount. Required: 1. Refer to case 1 shown above. Alpha Division can avoid $5 per unit in commissions on any sales to Beta Division. a. What is Alpha Division's lowest…
In each of the cases below, assume Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits. Case A B Division X: Capacity in units 200,000 200,000 Number of units being sold to outside customers 200,000 160,000 Selling price per unit to outside customers $ 90 $ 75 Variable costs per unit $ 70 $ 60 Fixed costs per unit (based on capacity) $ 13 $ 8 Division Y: Number of units needed for production 40,000 40,000 Purchase price per unit now being paid to an outside supplier $ 86 $ 74 Exercise 11-13 (Static) Part 2 Required:2. Refer to the data in case B above. In this case, there will be no savings in variable selling costs on intracompany sales. a. What is the lowest acceptable transfer price from the perspective of the selling division? b. What is the highest acceptable transfer…
Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A Division B Division C Sales 12440000$ 35550000$ 25550000$ Average operating assets 3110000$ 7110000$ 5110000$ Net operating income 547360$ 639900$ 740950$ Minimum required rate of return 10.00% 10.50% 14.50$ Required: 1.Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. 2.Compute the residual income for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 11% rate of return. a.If performance is being measured by ROI, which division or divisions will probably accept the opportunity? Reject? b.If performance is being measured by residual income, which division or divisions will probably accept the opportunity? Reject?
Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their own division’s return on investment (ROI). Assume the following information relative to the two divisions: Case 1 2 3 4 Alpha Division: Capacity in units 92,000 412,000 162,000 312,000 Number of units now being sold to outside customers 92,000 412,000 112,000 312,000 Selling price per unit to outside customers $ 54 $ 114 $ 135 $ 74 Variable costs per unit $ 42 $ 89 $ 100 $ 50 Fixed costs per unit (based on capacity) $ 6 $ 15 $ 20 $ 9 Beta Division: Number of units needed annually 17,000 42,000 32,000 122,400 Purchase price now being paid to an outside supplier $ 51 $ 113 $ 135* — *Before any purchase discount. Required: 1. Refer to case 1 shown above. Alpha Division can avoid $2 per unit in commissions on any sales to Beta Division. a. What is Alpha Division's lowest acceptable transfer price? b. What is Beta Division's…
Crane, Inc. has three divisions: Bud, Wise, and Er. The results of operations for May, 2022 are presented below. Units sold Revenue Less variable costs Less direct fixed costs Less allocated fixed costs Net income Bud 2,700 $63,000 28,800 12,600 5,400 $16,200 Wise 4,500 $45,000 23,400 17,100 9,000 $(4,500) Er 1,800 $36,000 14,400 10,800 3,600 $7,200 Total 9,000 $144,000 66,600 40,500 18,000 $18,900 All of the allocated costs will continue even if a division is discontinued. Crane allocates indirect fixed costs based on the number of units to be sold. Since the Wise division has a net loss, Crane is concerned that it should be discontinued. Crane thinks that if the division is closed, that sales at the Bud division will increase by 12% while sales at the Er division will stay the same.
7. Responsibility Accounting: a. What is a cost center? Give an example of a cost center b. What is a Profit center? Give an example of a profit center c. What is an investment center? Give an example of an investment center d. What is management by exception: e. The Hydride Division of Murdoch Corporation is an investment center. It has $1,000,000 of operating assets. During 2022, the Hydride Division earned operating income of $400,000 on $5,000,000 of sales. Murdoch's companywide return on investment or desired rate of return is approximately 20% SHOW WORK FOR CREDIT! 1. What is the ROI? 2. What is the margin? 3. What is the turnover? 4. What is the residual income?
The sales, income from operations, and invested assets for each division of Grosbeak Company are as follows: Sales Income fromOperations InvestedAssets Division E $5,000,000 $550,000 $2,400,000 Division F 4,800,000 860,000 2,500,000 Division G 7,000,000 860,000 2,900,000 a. Using the DuPont formula, determine the profit margin, investment turnover, and rate of return on investment for each division. Round profit margin to two decimal places, investment turnover to four decimal places and rate of return on investment to one decimal place. Division E Division F Division G Profit Margin % % % Investment Turnover Rate of return on investment % % % b. Which division is the most profitable per dollar invested?

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