Cable Company had the following results for the year just ended: Operating Income Farnover Return on Investment $2,500 4 200 What were Cable Company's average operating assets during the year? Multiple Choice $10,000 $12,500 $50,000 $200,000 ram Nort Collyer Products Inc. has a Valve Division that manufactures and sells a standard Valve as follows: Capacity in unite 250,000 selling price to outside customers on the intermediate market 117 Variable costa per unit 10 Pixed conta per unit band on capacity) The company has a Pump Division that could use this valve in the manufacture of one of its pumps. The Pump Division is currently purchasing 22,000 valves per year from an overseas supplier at a cost of $16 per valve. 1. Assume that the Valve Division has ample Idle capacity to handle all of the Pump Division's needs. What is the acceptable range. If any, for the transfer price between the two divisions? Transfer prior 2. Assume that the Valve Division is selling all that it can produce to outside customers on the intermediate market. What is the acceptable range, if any, for the transfer price between the two divisions? Transfer price 3. Assume again that the Valve Division is selling all that it can produce to outside customers on the Intermediate market. Also assume that $3 In variable expenses can be avoided on transfers within the company, due to reduced selling costs. What is the acceptable range. If any, for the transfer price between the two divisions? Trader pro 4. Assume the Pump Division needs 30,000 special high-pressure valves per year. The Valve Division's variable costs to manufacture and ship the special valve would be $12 per unit. To produce these special valves, the Valve Division would have to reduce its production and sales of regular valves from 250,000 units per year to 190,000 units per year. As far as the Valve Division is concerned, what is the lowest acceptable transfer price? (Round your answer to 2 decimal places.) Transfer price In each of the cases below, assume that Division X has a product that can be sold elther 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: Care Division X1 Capacity in unita Number of units being sold to outside customers Selling price per unit to outside customers Variable costs per unit Pixed costs per unit (based on capacity) Divinion Y: Number of units needed for production Purchase price per unit now being paid to an outside supplier 220,000 220,000 220,000 196,000 $62 $47 $30 $32 $10 $8 24,000 24,000 $59 $46 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 above. In this case there will be no reduction in variable selling costs on intracompany sales. 2-a. Refer to the data in case B above. In this case there will be no reduction in variable selling costs on Intracompany sales. Determine the transfer price of the selling division Transfer price 2-b. If the managers are free to negotiate and make decisions on their own, will a transfer take place? Yes No 2-c. What is the range of transfer price the managers of both divisions should agree? The transfer price can be a lowest of and a highest of
