Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Florida -brew, a local Florida micro-brewery, recently merged with a bottle making plant in New York to complement its Florida brewing facilities. Florida -brew has

Florida -brew, a local Florida micro-brewery, recently merged with a bottle making plant in New York to complement its Florida brewing facilities. Florida -brew has two divisions: Bottle Making and Brewing. Each division is evaluated as a profit centre.

Bottle Making Division The bottle making division makes cases of empty bottles and sells them on both the open market and to the brewing division. Other information is as follows:

Capacity 340,000 cases

Current Production 320,000 cases

Market selling price $6.00 per case

Variable costs $4.00 per case (based on current production)

Fixed costs $1.80 per case (based on current production)

Brewing Division The brewing division brews and bottles beer. It buys empty bottles from both the bottle making division and the open market. Other information is as follows:

Capacity 300,000 cases

Current Production 260,000 cases

Market selling price $40.00 per case

Variable cost* $28.00 per case (based on current production)

Fixed cost $10.00 per case (based on current production)

Note: The Variable cost per case includes an estimated cost of $6 per case of bottles

Each of these is a separate situation:

A. What is the minimum transfer price the bottle making division will sell an additional case of bottles to the brewery division?

B. What is the maximum transfer price the brewery division will buy an additional case of bottles from the bottling making division?

C. Current production for the Bottle division is based on estimated sales of 320,000 cases (170,000 cases on the open market and 150,000 cases to the brewery division). The brewery division would like to purchase an additional 30,000 cases from the bottle division. The special order does not requiring packaging - this will reduce the cost for the Bottling division by $0.05 per case. What is the minimum transfer prices per case the bottle making division will sell the additional 30,000 cases to the brewery division?

D. Based on the information in part C, what is the maximum price per case that the Brewing division is willing to pay for an additional 30,000 cases.

E. What kinds of things would the Bottling Division be responsible for if it was a Cost Centre instead of a profit centre?

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_2

Step: 3

blur-text-image_3

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

Survey Of Accounting

Authors: Carl S. Warren, Amanda Farmer

9th Edition

0357132599, 978-0357132593

More Books

Students also viewed these Accounting questions

Question

4. What means will you use to achieve these values?

Answered: 1 week ago

Question

3. What values would you say are your core values?

Answered: 1 week ago