Garcon Inc. manutactures electronic products, with two operating divisions, Consumer and Commercial Condenied divilonal income statemeritr, which involve no intracompany transfers and which indude a breokdown of expenses inte variable and fixed comoonente are as folloms: Divition. currently purchased from ositside suppliers ot a price of 5150 per unit. The Consumer Division is able to produme the materiah uipt by the commertial Bivisant, Facppt * $150 of the $193 per unit represents materials costs, and the remaining $43 per unit repeesents other variable conversion expenses incurred within the commertal Division. The Consumer Division is presently producing 14,400 units out of a total capacity of 17,280 units. Materials used in producing the Commercial Division 8 oroduct are currently purchased from outside suppliers at a price of $150 per unit. The Consumer Division is abie to produce the materials used by the Commercial Divinion. Except for the possible transfer of materials between divisions, no changes are expected in sales and expenses. Required: 1. Would the market price of $150 per unit be an appropriate transfer price for Garcon Inci? 2. If the Commercial Division purchases 2,880 units from the Consumer Division, rather than externally, at a negotated transfer arice of s115 ber init, how ifuch would the operating income of esch division and the total company operating income increase? The Consumer Division's operating income would increase by The Commercial Division's operating income would ifcrease by Garcon Inci's total operatang income would increase by 3. Prepare condensed divisional income statements for Garcon Inc. based on the data in part (2). Garcon Inc. Divisional Income statements For the Year Ended December 31, 20 Y 2 4. If a transfer price of $126 per unit is negotiated, how much would the operating income of each division and the total company operating income inerease? The Consumer Dlvision's operating income would increase by 4 The Commercial Division's operating income would increase by Garcon tncis total operating lncome would increase by $ 5a. What is the range of possible negotiated transfer prices thot would be acceptable for Garcon Inc,? Any transfer price than the Consumer Division's variable expenses per unit but than the macket prike would be acceptable. 56. Assuming that the managers of the two divisions cannot agree on a transfer price, what price would you suggest as the tranifer pnce? Garcon Inc. manutactures electronic products, with two operating divisions, Consumer and Commercial Condenied divilonal income statemeritr, which involve no intracompany transfers and which indude a breokdown of expenses inte variable and fixed comoonente are as folloms: Divition. currently purchased from ositside suppliers ot a price of 5150 per unit. The Consumer Division is able to produme the materiah uipt by the commertial Bivisant, Facppt * $150 of the $193 per unit represents materials costs, and the remaining $43 per unit repeesents other variable conversion expenses incurred within the commertal Division. The Consumer Division is presently producing 14,400 units out of a total capacity of 17,280 units. Materials used in producing the Commercial Division 8 oroduct are currently purchased from outside suppliers at a price of $150 per unit. The Consumer Division is abie to produce the materials used by the Commercial Divinion. Except for the possible transfer of materials between divisions, no changes are expected in sales and expenses. Required: 1. Would the market price of $150 per unit be an appropriate transfer price for Garcon Inci? 2. If the Commercial Division purchases 2,880 units from the Consumer Division, rather than externally, at a negotated transfer arice of s115 ber init, how ifuch would the operating income of esch division and the total company operating income increase? The Consumer Division's operating income would increase by The Commercial Division's operating income would ifcrease by Garcon Inci's total operatang income would increase by 3. Prepare condensed divisional income statements for Garcon Inc. based on the data in part (2). Garcon Inc. Divisional Income statements For the Year Ended December 31, 20 Y 2 4. If a transfer price of $126 per unit is negotiated, how much would the operating income of each division and the total company operating income inerease? The Consumer Dlvision's operating income would increase by 4 The Commercial Division's operating income would increase by Garcon tncis total operating lncome would increase by $ 5a. What is the range of possible negotiated transfer prices thot would be acceptable for Garcon Inc,? Any transfer price than the Consumer Division's variable expenses per unit but than the macket prike would be acceptable. 56. Assuming that the managers of the two divisions cannot agree on a transfer price, what price would you suggest as the tranifer pnce
