Take a Load Off Inc. manufactures furniture, with two operating divisions, Commercial and Residential. Condensed divisional income statements, which involve no intracompany transfers and which include a breakdown of expenses into variable and fixed components, are as follows: TAKE A LOAD OFF INC. Divisional Income Statements For the Year Ended July 31, 20Y5 Commercial Residential Division Division Total Sales: 95,000 units @ $60 per unit $5,700,000 $5,700,000 140,000 units $115 per unit $16,100,000 16,100,000 $5,700,000 $16,100,000 $21,800,000 Expenses: Variable: 95,000 units @ $42 per unit $(3,990,000) $(3,990,000) $(12,600,000) (12,600,000) 140,000 units @ $90 per unit (250,000) (550,000) (00,000) Fixed $(4,240,000) $(13,150,000) $(17,390,000) Total expenses $1,460,000 $2,950,000 $4,410,000 Operating income *$60 of the $90 per unit represents materials costs, and the remaining $30 per unit represents other variable conversion expenses incurred within the Residential Division. The Commercial Division is presently producing 95,000 units out of a total capacity of 150,000 units. Materials used in producing the Residential Division's product are currently purchased from outside suppliers at a price of $60 per unit. The Commercial Division is able to produce the materials used by the Residential Previous Next onLOcator%3D&inpro.. at a price of $60 per unit. The Commercial Division is able to produce the materials used by the Residential Division at a variable cost of $42 per unit. Except for the possible transfer of materials between divisions, no changes are expected in sales and expenses. Required: 1. Would the market price of $60 per unit be an appropriate transfer price for Take a Load Off Inc.? No v 2. If the Residential Division purchases 25,000 units from the Commercial Division, rather than externally, at a negotiated transfer price of $52 per unit, how much would the operating income of each division and the total company operating income increase? The Commercial Division's operating income would increase by The Residential Division's operating income would increase by Take a Load Off Inc.'s total operating income would increase by Eeeback 3. Prepare condensed divisional income statements for Take a Load Off Inc. based on the data in part (2). If an amount box does not require an entry, leave it blank. Take a Load Off Inc. Divisional Income Statements For the Year Ended July 31, 20Y5 Commercial Division Residential Division Total Sales: 95,000 units 25,000 units ( Previous Next> Check My Work Save and Exit Submit Assignment for Grading All work saved. Email Instructor 3. Prepare condensed divisional income statements for Take a Load Off Inc. based on the data in part (2). If an amount box does not require an entry, leave it blank. Take a Load Off Inc. Divisional Income Statements For the Year Ended July 31, 20Y5 Commercial Division Residential Division Total Sales: 95,000 units 25,000 units 140,000 units < JExpenses: Variable: 120,000 units 25,000 units 115,000 units Fixed Total expenses Operating income 4. If a transfer price of $49 per unit is negotiated, how much would the operating income of each division and the total company operating income increase? The Commercial Division's operating income would increase by The Residential Division's operating income would increase by Previous Next Check My Work Save and Exit Submit Assignment for Grading All work saved. Emall Instructor 115,000 units Fixed Total expenses Operating income Feedback 4. If a transfer price of $49 per unit is negotiated, how much would the operating income of each division and the total company operating income increase? The Commercial Division's operating income would increase by The Residential Division's operating income would increase by Take a Load Off Inc.'s total operating income would increase by 5a. What is the range of possible negotiated transfer prices that would be acceptable for Take a Load Ofr Inc.? Between $ and $ per unit 5b. Assuming that the managers of the two divisions cannot agree on a transfer price, what transfer price would represent the best compromise? per unit Foodback Esedback Previous Next> Check My Work