Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Calculate the Division operating income for the Harvey Shoe Company which manufactures only one type of shoe and has two divisions, the Madison Division, and

Calculate the Division operating income for the Harvey Shoe Company which manufactures only one type of shoe and has two divisions, the Madison Division, and the Assembly Division. The Sole Division manufactures soles for the Assembly Division, which completes the shoe and sells it to retailers. The Madison Division "sells" soles to the Assembly Division. The market price for the Assembly Division to purchase a pair of soles is $80. (Ignore changes in inventory.) The fixed costs for the Madison Division are assumed to be the same over the range of 80,000-200,000 units. The fixed costs for the Assembly Division are assumed to be $28 per pair at 200,000 units.

Madisons costs per pair of soles are: Direct materials $16 Direct labor $12 Variable overhead $8 Division fixed costs $4

Assembly's costs per completed pair of shoes are: Direct materials $24 Direct labor $8 Variable overhead $4 Division fixed costs $28

5) Assume the transfer price for a pair of soles is 180% of total costs of the Madison Division and 80,000 of soles are produced and transferred to the Assembly Division. The Madison Division's operating income is:

6) If the Assembly Division sells 200,000 pairs of shoes at a price of $240 a pair to customers, what is the operating income of both divisions together?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Alan Melville

2nd Edition

0273634399, 978-0273634393

More Books

Students also viewed these Accounting questions

Question

Define Management by exception

Answered: 1 week ago

Question

Explain the importance of staffing in business organisations

Answered: 1 week ago

Question

What are the types of forms of communication ?

Answered: 1 week ago