Calculating Transfer Price

Jelkin Corporation is a processor of apples. The manufacturing facility has two divisions: the puree division and the finishing division. As apples arrive at the facility, the puree division cleans and purees the apples into a smooth sauce. The apple sauce may be packaged in the puree division and sold on the wholesale market for $$22$ a batch, or transferred to the finishing division where it is packaged in glass jars and sold to grocery stores for $$35$ per batch. Jelkin is able to produce $400,000$ batches per year and reports the following costs per batch:

Puree Division Finishing Division

Direct material cost $ $8\mathrm{.}00$ $ $6\mathrm{.}00$

Direct manufacturing labour cost $2\mathrm{.}500\mathrm{.}75$

Variable overhead cost $3\mathrm{.}251\mathrm{.}50$

Fixed overhead cost $1\mathrm{.}252\mathrm{.}75$

Full manufacturing cost $$15\mathrm{.}00$ $$11\mathrm{.}00$

Required:

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$1.$ What is the minimum transfer price the puree division manager would accept?

$fill in the blank $51$ca$55$ff$9$fd$7$ff$1\_1$

What is the maximum transfer price the finishing division would accept?

$fill in the blank $51$ca$55$ff$9$fd$7$ff$1\_2$

Briefly explain.

The input in the box below will not be graded, but may be reviewed and considered by your instructor.

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$2.$ Assuming the $400,000$ batches are transferred to the finishing division, compute the operating income for each division using:

$($a$)$ market price for the transfer price. Round your answers to two decimal places, if necessary.

i$.$ Puree Division Operating Income.

Jelkin Corporation

Puree Division Operating Income

blank

Per Batch For $400,000$ Batches

Sales revenue $fill in the blank $80$d$0$c$6$f$5$e$07$dfd$8\_1$

$fill in the blank $80$d$0$c$6$f$5$e$07$dfd$8\_2$

Less:

Direct material cost fill in the blank $80$d$0$c$6$f$5$e$07$dfd$8\_3$

fill in the blank $80$d$0$c$6$f$5$e$07$dfd$8\_4$

Direct labour cost fill in the blank $80$d$0$c$6$f$5$e$07$dfd$8\_5$

fill in the blank $80$d$0$c$6$f$5$e$07$dfd$8\_6$

Variable overhead fill in the blank $80$d$0$c$6$f$5$e$07$dfd$8\_7$

fill in the blank $80$d$0$c$6$f$5$e$07$dfd$8\_8$

Fixed overhead fill in the blank $80$d$0$c$6$f$5$e$07$dfd$8\_9$

fill in the blank $80$d$0$c$6$f$5$e$07$dfd$8\_10$

Total $fill in the blank $80$d$0$c$6$f$5$e$07$dfd$8\_11$

$fill in the blank $80$d$0$c$6$f$5$e$07$dfd$8\_12$

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ii$.$ Finishing Division Operating Income.

Jelkin Corporation

Finishing Division Operating Income

blank

Per Batch For $400,000$ Batches

Sales revenue $fill in the blank $7836$edf$61$ffdf$80\_1$

$fill in the blank $7836$edf$61$ffdf$80\_2$

Less:

Transferred$-$in costs fill in the blank $7836$edf$61$ffdf$80\_3$

fill in the blank $7836$edf$61$ffdf$80\_4$

Direct material cost fill in the blank $7836$edf$61$ffdf$80\_5$

fill in the blank $7836$edf$61$ffdf$80\_6$

Direct labour cost fill in the blank $7836$edf$61$ffdf$80\_7$

fill in the blank $7836$edf$61$ffdf$80\_8$

Variable overhead fill in the blank $7836$edf$61$ffdf$80\_9$

fill in the blank $7836$edf$61$ffdf$80\_10$

Fixed overhead fill in the blank $7836$edf$61$ffdf$80\_11$

fill in the blank $7836$edf$61$ffdf$80\_12$

Total $fill in the blank $7836$edf$61$ffdf$80\_13$

$fill in the blank $7836$edf$61$ffdf$80\_14$

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$($b$)$ full manufacturing cost plus $10$ percent for the transfer price. Round your answers to two decimal places, if necessary.

i$.$ Puree Division Operating Income.

Jelkin Corporation

Puree Division Operating Income

blank

Per Batch For $400,000$ Batches

Sales revenue $fill in the blank $5$f$935702$f$077030\_1$

$fill in the blank $5$f$935702$f$077030\_2$

Less:

Direct material cost fill in the blank $5$f$935702$f$077030\_3$

fill in the blank $5$f$935702$f$077030\_4$

Direct labour cost fill in the blank $5$f$935702$f$077030\_5$

fill in the blank $5$f$935702$f$077030\_6$

Variable overhead fill in the blank $5$f$935702$f$077030\_7$

fill in the blank $5$f$935702$f$077030\_8$

Fixed overhead fill in the blank $5$f$935702$f$077030\_9$

fill in the blank $5$f$935702$f$077030\_10$

Total $fill in the blank $5$f$935702$f$077030\_11$

$fill in the blank $5$f$935702$f$077030\_12$

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ii$.$ Finishing Division Operating Income.

Jelkin Corporation

Finishing Division Operating Income

blank

Per Batch For $400,000$ Batches

Sales revenue $fill in the blank b$4$b$119$ff$002$a$053\_1$

$fill in the blank b$4$b$119$ff$002$a$053\_2$

Less:

Transferred$-$in costs fill in the blank b$4$b$119$ff$002$a$053\_3$

fill in the blank b$4$b$119$ff$002$a$053\_4$

Direct material cost fill in the blank b$4$b$119$ff$002$a$053\_5$

fill in the blank b$4$b$119$ff$002$a$053\_6$

Direct labour cost fill in the blank b$4$b$119$ff$002$a$053\_7$

fill in the blank b$4$b$119$ff$002$a$053\_8$

Variable overhead fill in the blank b$4$b$119$ff$002$a$053\_9$

fill in the blank b$4$b$119$ff$002$a$053\_10$

Fixed overhead fill in the blank b$4$b$119$ff$002$a$053\_11$

fill in the blank b$4$b$119$ff$002$a$053\_12$

Total $fill in the blank b$4$b$119$ff$002$a$053\_13$

$fill in the blank b$4$b$119$ff$002$a$053\_14$

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$3.$ If the division managers are awarded a bonus based on division operating income, briefly explain which transfer price each division manager would prefer.

The input in the box below will not be graded, but may be reviewed and considered by your instructor.