Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Bramble Consolidated has several divisions, two of which transfer their products to other divisions. The Mining division refines toldine, which it then transfers to the
Bramble Consolidated has several divisions, two of which transfer their products to other divisions. The Mining division refines toldine, which it then transfers to the Metals division. The Metals division processes the toldine into an alloy and sells it to customers at a price of $154 per barrel. Bramble currently requires the Mining division to transfer its total anual output of 408,500 barrels of toldine to the Metals division at total manufacturing cost plus 10%. Unlimited quantities of toldine can be purchased and sold on the open market at $91 per barrel. While the Mining division could sell all the toldine it produces on the open market at $91 per barrel it would incur a variable selling cost of $5 per unit to do so. Barker Jonas, manager of the Mining division, is unhappy with having to transfer the division's entire output of toldine to the Metals division at 110% of cost. In a meeting with the management of Bramble, he protested, "Why should my division be required to sell toldine to the Metals Division at less than market price? For the year just ended in May, Metals contribution margin was over $20 million on sales of 408,500 barrels, while Mining's contribution on the transfer of the same number of units was just over $5 million My division is subsidizing the profitability of the Metak division. We should be allowed to charge market price for toldine when we transfer it to the Metals division Detailed unit costs for both the Mining and Metals divisions follow. Mining Metals Division Transfer price from Mining division $66 Direct material Direct labor Manufacturing overhead Total cost per barrel $118 Division $11 16 33 $60 7 21 24 Manufacturing overhead cost in the Mining division is 25% fixed and 75% variable. In the Metals division, it is 60 fred and 40 variable (c) Beamble Consolidated were to institute negotiated transfer prices and allow divisions to buy and sell on the open market, what price range for toldine would be acceptable to both divisions? $ 16 Minimum transfer price that mining will accept Maximum pricat that mutab will pay e Textbook and Media Attempts tof 3 used Suits Sys for a Last ved 1 hour Saved work will be it-mitted the due date
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