Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Agre Corporation has two divisions. The mining division makes toldine. which is then transferred to the metals division. The toldine is further processed by the
Agre Corporation has two divisions. The mining division makes toldine. which is then transferred to the metals division. The toldine is further processed by the metals division and is sold to customers at a price of $165 per unit. The mining division is currently required by Agre to transfer its total yearly output of 220,000 units of toldine to the metals division at 130% of full manufacturing cost Unlimited quantities of toldine can be purchased and sold on the outside market at $85 per unit. The following table gives the manufacturing cost per unit in the mining and metals divisions for 2014: Calculate the operating incomes for the mining and metals divisions for the 220.000 units of toldine transferred under the following transfer-pricing methods (a) market price and (b) 130% of full manufacturing cost. Begin with calculating the operating income for the mining division under each method by entering the appropriate amounts, then complete the table for the metal division. Calculate the operating incomes for the mining and metals divisions for the 220,000 units of toldine transferred under the following transfer-pricing methods: (a) market price and (b) 130% of full manufacturing cost Suppose Agre rewards each division manager with a bonus, calculated as 1% of division operating income (if positive). What is the amount of bonus that will be paid to each division manager under the transfer-pricing methods in requirement 1? Which transfer-pricing method will each division manager prefer to use? What arguments would Blane Jones, manager of the mining division, make to support the transfer-pricing method that he prefers
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started