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5526518.pdf - Adobe Acrobat Reader DC File Edit View Window Help Home Tools 5526518.pdf Sign In 11/14 106% 26 Share Search Watermark 16.28 Transfer price; incentives for internal services LO4,5 Avra Valley Services has two divisions, Computer Services and Management Advisory Ser- vices. Both divisions work for external customers and, in addition, work for each other. Fees carned by Computer Services from external customers were $400 000 in 2017. Fees earned by Management Advisory Services from external customers were $700000 in 2017. Computer worked 3000 hours for Management Advisory Services last year, and Management Advisory Services worked 1200 hours for Computer Services. The total costs of external services performed by Computer Services were $220000, and for Management Advisory Ser- vices costs were $480 000 D. Export PDF Services Adobe Export PDF Convert PDF Files to Word or Excel Online Required Select PDF File Convert to Microsoft Word (.docx) (a) Determine the operating income for each division and for the entity as a whole if the transfer price from Computer Services to Management Advisory Services is $50 per hour, and the transfer price from Management Advisory Services to Computer Services is $60 per hour. (b) The manager of Computer Services has found another entity willing to provide the same services as Management Advisory Services at $50 per hour. All of the employees in both units are guaranteed 40-hour working weeks. Currently, Management Advisory Services has idle capacity because of an economic downturn. Calculate the change in operating income for the entity as a whole if Computer Services uses outsourced services instead of using Management Advisory Services. (e) Recommend a transfer price policy that would provide incentives to use the internal services. Explain your recommendation (d) Discuss possible qualitative factors that might affect the attractiveness of the outsourcing option. 16.29 ROI; residual income; EVA; effect on investment decision; performance evaluation Strong Welding Equipment Company produces and sells welding equipment nationally and inter- nationally. Following is information about two divisions in US dollars. Document Language: English (U.S.) Change Convert and edit PDFs with Acrobat Pro DC LO3 Start Free trial 626 PART 2 Management accounting, extending performance measurement and strategy Type here to search H ENG 11:35 AM 29/05/2020