Dole Industries produces chemical compounds. Division A mixes the compounds which are then transferred to Division...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Dole Industries produces chemical compounds. Division A mixes the compounds which are then transferred to Division B for refinement for 125% of full manufacturing costs. Current output by Division A is 50,000 compounds. Division B is then able to sell the final product to pharmaceutical companies for $150 per compound. Division B can purchase compounds in the market for a price of $75 a compound. Divisional costs per compound are: • Division A ● o Direct Materials - $10 o Direct Manufacturing labor - $10 Manufacturing overhead cost-$25 (40% of costs are variable) Division B o Direct Materials - $3 o Direct Manufacturing labor costs - $12 o Manufacturing overhead cost - $20 (35% of costs are variable) Required a. Calculate the operating income for each division under the following transfer-pricing methods: Market price and 125% of full manufacturing cost. b. If manager of each division receives a bonus of 1% based on the divisional operating income, report what bonus each manager would receive under each transfer price method. Which transfer price would each manager prefer? Dole Industries produces chemical compounds. Division A mixes the compounds which are then transferred to Division B for refinement for 125% of full manufacturing costs. Current output by Division A is 50,000 compounds. Division B is then able to sell the final product to pharmaceutical companies for $150 per compound. Division B can purchase compounds in the market for a price of $75 a compound. Divisional costs per compound are: • Division A ● o Direct Materials - $10 o Direct Manufacturing labor - $10 Manufacturing overhead cost-$25 (40% of costs are variable) Division B o Direct Materials - $3 o Direct Manufacturing labor costs - $12 o Manufacturing overhead cost - $20 (35% of costs are variable) Required a. Calculate the operating income for each division under the following transfer-pricing methods: Market price and 125% of full manufacturing cost. b. If manager of each division receives a bonus of 1% based on the divisional operating income, report what bonus each manager would receive under each transfer price method. Which transfer price would each manager prefer?
Expert Answer:
Answer rating: 100% (QA)
To calculate the operating income for each division under the market price and 125 of full manufacturing cost transferpricing methods well first calculate the relevant costs and revenues for both divi... View the full answer
Related Book For
Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher
Posted Date:
Students also viewed these accounting questions
-
If the medium-size facility is constructed and the demand turns out to be low, the net return is estimated at $28 million. Jo-Jo Inc. is a manufacturing firm that produces soap. The company is owned...
-
Skiax Consolidated, a decentralized company, compensates the management of each division with a fixed salary plus a cash bonus which is a function of the divisions profitability. Skiax has three...
-
The surface area of plane x+y+z=1 in side the cylinder x + y = 1 is kn. The value of kis
-
An individual can deduct for tax purposes the interest expense incurred on the mortgage loan attached to his or her personal residence. Is this statement true? Explain.
-
Given x 1 and x 2 distributions that are normal or approximately normal with unknown 1 and 2 , the value of t corresponding to x 1 x 2 has a distribution that is approximated by a Students t...
-
Dollar Tree Stores, Inc., and Dollar General Corporation are both discount retailers. As their adapted income statements (in $ millions) show, Dollar General's sales revenue was more than double that...
-
Exactly two vertices of odd degree Use the graphs and multigraphs in Figure 12.354. Identify any graphs and/or multigraphs with the given characteristics. If there are none, state so.
-
(Matching) Hinckley Nuclear Power Plant will be mothballed at the end of its useful life (approximately 20 years) at great expense. The matching principle requires that expenses be matched to...
-
The graph of f(x) has the following properties. i) f(x) is increasing when x 1; ii) f(x) is decreasing on the interval -1 0. Sketch a possible graph of f'(x). Explain why there is more than one...
-
Using Exhibit 1.3 as a model, describe the source- make- deliver-return relationships in the following systems: From Exhibit 1.3 a. An airline b. An automobile manufacturer c. A hospital d. An...
-
Star City is considering an investment in the community center that is expected to return the following cash flows. Use Exhibit A.8. Net Cash Flow Year 1 $ 21,000 2 51,000 81,000 4 81,000 101,000...
-
1. What is leadership? define leadership and describe at least 5 characteristics of effective leaders. 2. Reflect on your results from the Human Relations Self-Assessment Quiz below How participative...
-
Jagger has a car loan payment of $325 per month, a mortgage on his condo of $1700 per month, and he is on a monthly payment plan to pay off his GAP Store Credit card at $75 per month. His income as a...
-
What is the wavelength of the 196 Hz musical note that you synthesized as it travels through air? Enter a number rounded to 2 decimal places and assume units are in feet (ft)
-
Battleboats is a probability-based board game that challenges the user to locate enemy boats hidden on a rectangular grid. The purpose of the game is to locate and destroy every enemy Boat in the...
-
Write a one-paragraph film pitch for an original production.For example, you might choose "documentary" and decide you would like to make a documentary exploring the role of sports in the social life...
-
The recommended hours of sleep per night for adults is 8 hours. A doctor, who works at a sleep study facility, believes the average number of hours of sleep per night for adults is more than the...
-
Where are the olfactory sensory neurons, and why is that site poorly suited for their job?
-
A company prepares the master budget by taking each division managers estimate of revenues and costs for the coming period and entering the data into the budget without adjustment. At the end of the...
-
What are examples of two non-value-added activities that could be found in merchandising organizations such as (a) A clothing retail store and (b) A record store?
-
Midwest Entertainment has four operating divisions: Bus Charters, Lodging, Concerts, and Ticket Services. Each division is a separate segment for financial reporting purposes. Revenues and costs...
-
NOPAT is the amount of net income a company would generate if it had no debt and held no financial assets. NOPAT is a better measure of the performance of a company's operations because debt lowers...
-
Free cash flow is the cash flow actually available for distribution to investors after the company has made all the investments in fixed assets and working capital necessary to sustain ongoing...
-
If the business were organized as a partnership or a proprietorship, its income could be taken out by the owners without being subject to double taxation. Also, if you expected to have losses for a...
Study smarter with the SolutionInn App