Hi, I need some help with the below, thanks!
Amazon Beverages produces and bottles a line of soft drinks using exotic fruits from Latin America and Asia. The manufacturing process entails mixing and adding juices and coloring ingredients at the bottling plant, which is a part of Mixing Division. The finished product is packaged in a company-produced glass bottle and packed in cases of 24 bottles each. Because the appearance of the bottle heavily influences sales volume, Amazon developed a unique bottle production process at the company's container plant, which is a part of Container Division. Mixing Division uses all of the container plant's production. Each division (Mixing and Container) is considered a separate profit center and evaluated as such. As the new corporate controller, you are responsible for determining the proper transfer price to use for the bottles produced for Mixing Division. At your request, Container Division's general manager asked other bottle manufacturers to quote a price for the number and sizes demanded by Mixing Division. These competitive prices follow. Volume Total Price Price per Case 5g8, 808 equivalent cases 1, 168, 838 1, 748, 838 12,528,080 7.28 An equivalent case represents 24 bottles. Container Division's cost analysis indicates that it can produce bottles at these costs. Cost per Volume Total Cost Case 580, 808 equivalent cases $ 4,344,080 $7.49 1, 168, 808 7,789,988 6.64 1, 748, 838 11,872,080 6.36 These costs include fixed costs of $980,000 and variable costs of $5.80 per equivalent case. These date have caused considerable corporate discussion as to the proper price to use in the transfer of bottles from Container Division to Mixing Division. This interest is heightened because a significant portion of a division manager's income is on incentive bonus based on profit center results. Mixing Division has the following costs in addition to the bottle costs. Cost per Volume Total Cost Case 588, 808 equivalent cases $1,980,080 $3.4 1, 168, 838 2,780,080 2.48 1, 748, 838 3,580,080 2.86 The corporate marketing group has furnished the following price-demand relationship for the finished product: Sales Volume Total sales Sales Price Revenue per Case 580, Bae equivalent cases $12,644,080 $21.88 1, 168, 808 22,968, 080 1, 748, 838 29,232,080 16.88 Required: a. Amazon Beverages has used market price-based transfer prices in the post. Using the current market prices and costs and assuming a volume of 1.74 million cases. Calculate operating profits for Container Division, Mixing Division, Amazon Beverages. b-1. Calculate operating profits for Container, Mixing and Amazon Beverages for volumes of 580,000, 1160,000 and 1740,000 cases. b-2. Which volume of production is the most profitable for Container, Mixing and Amazon Beverages
