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11/12/2015 CH 11 - Performance Measurement Reda Alrashid Managerial Accounting 15e: Fall 2015 CH 11 - Performance Measurement 1. instructions | help value: 2.50 points Alyeska Services Company, a division of a major oil company, provides various services to the operators of the North Slope oil field in Alaska. Data concerning the most recent year appear below: Sales Net operating income Average operating assets $18,100,000 $ 4,800,000 $36,200,000 Required: 1. Compute the margin for Alyeska Services Company. (Round your answer to 2 decimal places.) Margin % 2. Compute the turnover for Alyeska Services Company. (Round your answer to 2 decimal places.) Turnover 3. Compute the return on investment (ROI) for Alyeska Services Company. (Round your intermediate calculations and final answer to 2 decimal places.) ROI % Hints References eBook & Resources Hint #1 Check my work 2015 McGraw-Hill Education. All rights reserved. http://ezto.mheducation.com/hm.tpx 1/1 11/12/2015 CH 11 - Performance Measurement Reda Alrashid Managerial Accounting 15e: Fall 2015 CH 11 - Performance Measurement 3. instructions | help value: 2.50 points Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Assets Cash $ 137,000 Accounts receivable 347,000 Inventory 562,000 Plant and equipment, net 854,000 Investment in Buisson, S.A. 406,000 Land (undeveloped) 254,000 Total assets $ 2,560,000 Liabilities and Stockholders' Equity Accounts payable $ 380,000 Long-term debt 1,042,000 Stockholders' equity 1,138,000 Total liabilities and stockholders' equity $ 2,560,000 Ending Balance $ 129,000 488,000 479,000 844,000 433,000 246,000 $ 2,619,000 $ 349,000 1,042,000 1,228,000 $ 2,619,000 Joel de Paris, Inc. Income Statement Sales Operating expenses Net operating income Interest and taxes: Interest expense Tax expense Net income $ 119,000 195,000 $ 4,608,000 3,778,560 829,440 314,000 $ 515,440 The company paid dividends of $425,440 last year. The \"Investment in Buisson, S.A.,\" on the balance sheet represents an investment in the stock of another company. Required: 1. Compute the company's margin, turnover, and return on investment (ROI) for last year. (Round your answers to 2 decimal places.) Margin % Turnover ROI % 2. The board of directors of Joel de Paris, Inc., has set a minimum required rate of return of 19%. What was the company's residual income last year? http://ezto.mheducation.com/hm.tpx 1/2 11/12/2015 CH 11 - Performance Measurement Net operating income Minimum required return $ Residual income 0 References eBook & Resources Worksheet Learning Objective: 11-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI. Difficulty: 2 Medium Learning Objective: 11-02 Compute residual income and understand its strengths and weaknesses. Check my work 2015 McGraw-Hill Education. All rights reserved. http://ezto.mheducation.com/hm.tpx 2/2 11/12/2015 CH 11 - Performance Measurement Reda Alrashid Managerial Accounting 15e: Fall 2015 CH 11 - Performance Measurement 4. instructions | help value: 2.50 points Division A manufactures electronic circuit boards. The boards can be sold either to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: Selling price per circuit board Variable cost per circuit board Number of circuit boards: Produced during the year Sold to outside customers Sold to Division B $192 $117 21,200 15,000 6,200 Sales to Division B were at the same price as sales to outside customers. The circuit boards purchased by Division B were used in an electronic instrument manufactured by that division (one board per instrument). Division B incurred $290 in additional variable cost per instrument and then sold the instruments for $660 each. Required: 1. Prepare income statements for Division A, Division B, and the company as a whole. Division A Division B Total Company Sales $ 0 Expenses: Added by the division 0 Transfer price paid 0 Total expenses Net operating income 0 0 0 $ $ 0 0 $ 0 2. Assume that Division A's manufacturing capacity is 21,200 circuit boards. Next year, Division B wants to purchase 7,200 circuit boards from Division A rather than 6,200. (Circuit boards of this type are not available from outside sources.) What should Division A do from the standpoint of the company as a whole? Continue to sell the circuit boards to outside customers. Sell the 1,000 additional circuit boards to Division B. References Worksheet eBook & Resources Difficulty: 1 Easy Learning Objective: 11-05 (Appendix 11A) Determine the range, if any, within which a negotiated transfer price should fall. Check my work 2015 McGraw-Hill Education. All rights reserved. http://ezto.mheducation.com/hm.tpx 1/2 11/12/2015 http://ezto.mheducation.com/hm.tpx CH 11 - Performance Measurement 2/2 11/12/2015 CH 11 - Performance Measurement Reda Alrashid Managerial Accounting 15e: Fall 2015 CH 11 - Performance Measurement 5. instructions | help value: 2.50 points Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the production of various paper goods. Revenue and costs associated with a ton of pulp follow: Selling price Expenses: Variable Fixed (based on a capacity of 99,000 tons per year) Net operating income $23 $14 6 20 $3 Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be treated as a division of Hrubec with full profit responsibility. The newly formed Carton Division is currently purchasing 33,000 tons of pulp per year from a supplier at a cost of $23 per ton, less a 10% purchase discount. Hrubec's president is anxious for the Carton Division to begin purchasing its pulp from the Pulp Division if an acceptable transfer price can be worked out. Required: For (1) and (2) below, assume that the Pulp Division can sell all of its pulp to outside customers for $23 per ton. 1-a. What is the minimum transfer price for Carton Division? 0 $ Transfer price 0 1-b. What is the maximum transfer price that Pulp Division is ready to pay? (Round your answer to 2 decimal places.) http://ezto.mheducation.com/hm.tpx 1/3 11/12/2015 CH 11 - Performance Measurement 1-c. Are the managers of the Carton and Pulp Divisions likely to voluntarily agree to a transfer price for 33,000 tons of pulp next year? No Yes 2. If the Pulp Division meets the price that the Carton Division is currently paying to its supplier and sells 33,000 tons of pulp to the Carton Division each year, what will be the effect on the profits of the Pulp Division, the Carton Division, and the company as a whole? a. Profits of the Pulp Division will by b. Profits of the Carton Division will by c. Profits of the company as a whole will by For (3)-(6) below, assume that the Pulp Division is currently selling only 57,000 tons of pulp each year to outside customers at the stated $23 price. 3a. What is the minimum transfer price for Pulp Division? Minimum transfer price 3-b. What is the range of transfer price the manager's of both divisions should agree? (Round your answers to 2 decimal places.) The lowest transfer price would be and the highest transfer price would be 3-c. Are the managers of the Carton and Pulp Divisions likely to voluntarily agree to a transfer price for 33,000 tons of pulp next year? Yes No 4-a. Suppose that the Carton Division's outside supplier drops its price (net of the purchase discount) to only $19 per ton. Should the Pulp Division meet this price? Yes No 4-b. How much potential profit will the Pulp Division lose if the $19 price is not met? http://ezto.mheducation.com/hm.tpx 2/3 11/12/2015 CH 11 - Performance Measurement Profit of the company will by 5. Refer to (4) above. If the Pulp Division refuses to meet the $19 price, should the Carton Division be required to purchase from the Pulp Division at a higher price for the good of the company as a whole? No Yes 6. Refer to (4) above. Assume that due to inflexible management policies, the Carton Division is required to purchase 33,000 tons of pulp each year from the Pulp Division at $23 per ton. What will be the effect on the profits of the company as a whole? References Worksheet eBook & Resources Difficulty: 2 Medium Learning Objective: 11-05 (Appendix 11A) Determine the range, if any, within which a negotiated transfer price should fall. Check my work 2015 McGraw-Hill Education. All rights reserved. http://ezto.mheducation.com/hm.tpx 3/3 11/12/2015 CH 11 - Performance Measurement Managerial Accounting 15e: Fall 2015 CH 11 - Performance Measurement 6. Reda Alrashid instructions | help value: 2.50 points Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company's mine to its two steel millsthe Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $300,000 per year, consisting of $0.19 per ton variable cost and $250,000 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 63% of the Transport Services Department's capacity and the Southern Plant requires 37%. During the year, the Transport Services Department actually hauled the following amounts of ore for the two plants: Northern Plant, 112,000 tons; Southern Plant, 65,800 tons. The Transport Services Department incurred $366,000 in cost during the year, of which $53,300 was variable cost and $312,700 was fixed cost. Required: 1. Determine how much of the $53,300 in variable cost should be charged to each plant. Variable cost charged to Northern Plant Variable cost charged to Southern Plant 2. Determine how much of the $312,700 in fixed cost should be charged to each plant. Fixed cost charged to Northern Plant Fixed cost charged to Southern Plant 3. Should any of the $366,000 in the Transport Services Department cost not be charged to the plants? Unallocated cost References Worksheet eBook & Resources Difficulty: 1 Easy Learning Objective: 11-06 (Appendix 11B) Charge operating departments for services provided by service departments. Check my work http://ezto.mheducation.com/hm.tpx 1/2 11/12/2015 CH 11 - Performance Measurement 2015 McGraw-Hill Education. All rights reserved. http://ezto.mheducation.com/hm.tpx 2/2 11/12/2015 CH 11 - Performance Measurement Reda Alrashid Managerial Accounting 15e: Fall 2015 CH 11 - Performance Measurement 2. instructions | help value: 2.50 points A family friend has asked your help in analyzing the operations of three anonymous companies operating in the same service sector industry. Supply the missing data in the table below: (Loss amounts should be indicated by a minus sign.) Company A Sales $ B 440,000 C Average operating assets Return on investment (ROI) $ $ 820,000 $ Net operating income 39,000 $ $ 154,000 550,000 158,000 18 % 17 % % 16 % % 9 % Minimum required rate of return: Percentage Dollar amount $ Residual income References 56,000 $ 5,000 eBook & Resources Worksheet Learning Objective: 11-01 Compute return on investment (ROI) and show how changes in sales, expenses, and assets affect ROI. Difficulty: 1 Easy Learning Objective: 11-02 Compute residual income and understand its strengths and weaknesses. Check my work 2015 McGraw-Hill Education. All rights reserved. http://ezto.mheducation.com/hm.tpx 1/1 Check Your Work 1 of 3 http://ezto.mheducation.com/hm.tpx 11/14/2015 3:17 PM Check Your Work 2 of 3 http://ezto.mheducation.com/hm.tpx Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Cash Accounts receivable Inventory Plant and equipment, net Investment in Buisson, S.A. Land (undeveloped) Assets Beginning Balance Ending Balance $ 137,000 $ 129,000 347,000 488,000 562,000 479,000 854,000 844,000 406,000 433,000 254,000 246,000 Total assets $ 2,560,000 $ 2,619,000 Liabilities and Stockholders' Equity Accounts payable $ 380,000 $ 349,000 Long-term debt 1,042,000 1,042,000 Stockholders' equity 1,138,000 1,228,000 Total liabilities and stockholders' equity Joel de Paris, Inc. Income Statement Sales Operating expenses Net operating income Interest and taxes: Interest expense Tax expense Net income $ 2,560,000 $ 2,619,000 $ 4,608,000 3,778,560 829,440 $ 119,000 195,000 314,000 $ 515,440 The company paid dividends of $425,440 last year. The \"Investment in Buisson, S.A.,\" on the balance sheet represents an investment in the stock of another company. Required: 1. Compute the company's margin, turnover, and return on investment (ROI) for last year. (Round your answers to 2 decimal places.) 11/14/2015 3:17 PM Check Your Work 3 of 3 http://ezto.mheducation.com/hm.tpx 18.00 Turnover % 7.91 Margin % 1.77 ROI 2. The board of directors of Joel de Paris, Inc., has set a minimum required rate of return of 19%. What was the company's residual income last year? Net operating income $ Residual income $ Minimum required return 829,440 216,220 613,220 2015 McGraw-Hill Education. All rights reserved. 11/14/2015 3:17 PM Check Your Work 1 of 2 http://ezto.mheducation.com/hm.tpx 11/14/2015 3:15 PM Check Your Work 2 of 2 http://ezto.mheducation.com/hm.tpx Division A manufactures electronic circuit boards. The boards can be sold either to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: Selling price per circuit board Variable cost per circuit board Number of circuit boards: Produced during the year Sold to outside customers Sold to Division B $192 $117 21,200 15,000 6,200 Sales to Division B were at the same price as sales to outside customers. The circuit boards purchased by Division B were used in an electronic instrument manufactured by that division (one board per instrument). Division B incurred $290 in additional variable cost per instrument and then sold the instruments for $660 each. Required: 1. Prepare income statements for Division A, Division B, and the company as a whole. $ Sales Expenses: Added by the division Net operating income 4,070,400 $ $ 4,049,083 4,092,000 Total Company $ $ 2,988,400 1,103,600 8,162,400 1,819,200 1,190,400 117 21,317 Division B 1,798,000 21,200 Transfer price paid Total expenses Division A 1,190,517 $ 3,009,717 5,152,683 2. Assume that Division A's manufacturing capacity is 21,200 circuit boards. Next year, Division B wants to purchase 7,200 circuit boards from Division A rather than 6,200. (Circuit boards of this type are not available from outside sources.) What should Division A do from the standpoint of the company as a whole? Continue to sell the circuit boards to outside customers. Sell the 1,000 additional circuit boards to Division B. 2015 McGraw-Hill Education. All rights reserved. 11/14/2015 3:15 PM Check Your Work 1 of 4 http://ezto.mheducation.com/hm.tpx 11/14/2015 2:52 PM Check Your Work 2 of 4 http://ezto.mheducation.com/hm.tpx Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the production of various paper goods. Revenue and costs associated with a ton of pulp follow: Selling price Expenses: Variable Fixed (based on a capacity of 99,000 tons per year) $23 $14 6 20 Net operating income $3 Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be treated as a division of Hrubec with full profit responsibility. The newly formed Carton Division is currently purchasing 33,000 tons of pulp per year from a supplier at a cost of $23 per ton, less a 10% purchase discount. Hrubec's president is anxious for the Carton Division to begin purchasing its pulp from the Pulp Division if an acceptable transfer price can be worked out. Required: For (1) and (2) below, assume that the Pulp Division can sell all of its pulp to outside customers for $23 per ton. 1-a. What is the minimum transfer price for Carton Division? Variable cost per unit Total contribution margin on lost sales No. of units transferred Transfer price $ 0 0 $ $ 0 0 0 1-b. What is the maximum transfer price that Pulp Division is ready to pay? (Round your answer to 2 decimal places.) Maximum transfer price $ 23.00 1-c. Are the managers of the Carton and Pulp Divisions likely to voluntarily agree to a transfer price for 33,000 tons of pulp next year? No Yes 2. If the Pulp Division meets the price that the Carton Division is currently paying to its supplier and sells 33,000 tons of pulp to the Carton Division each year, what will be the effect on the profits of the Pulp Division, the Carton Division, and the company as a whole? 11/14/2015 2:52 PM Check Your Work 3 of 4 http://ezto.mheducation.com/hm.tpx a. Profits of the Pulp Division will decrease by $ c. Profits of the company as a whole will decrease by $ b. Profits of the Carton Division will remain unchanged by $ 0 0 0 For (3)-(6) below, assume that the Pulp Division is currently selling only 57,000 tons of pulp each year to outside customers at the stated $23 price. 3a. What is the minimum transfer price for Pulp Division? Minimum transfer price $ 14 3-b. What is the range of transfer price the manager's of both divisions should agree? (Round your answers to 2 decimal places.) The lowest transfer price would be $ 14.00 and the highest transfer price would be $ 23.00 3-c. Are the managers of the Carton and Pulp Divisions likely to voluntarily agree to a transfer price for 33,000 tons of pulp next year? No Yes 4-a. Suppose that the Carton Division's outside supplier drops its price (net of the purchase discount) to only $19 per ton. Should the Pulp Division meet this price? No Yes 4-b. How much potential profit will the Pulp Division lose if the $19 price is not met? Profit of the company will decrease by $ 165,000 5. Refer to (4) above. If the Pulp Division refuses to meet the $19 price, should the Carton Division be required to purchase from the Pulp Division at a higher price for the good of the company as a whole? No Yes 6. Refer to (4) above. Assume that due to inflexible management policies, the Carton Division is required to purchase 33,000 tons of pulp each year from the Pulp Division at $23 per ton. What will be the effect on the profits of the company as a whole? 11/14/2015 2:52 PM Check Your Work 4 of 4 http://ezto.mheducation.com/hm.tpx a. The Pulp Division will have a(n) increase in profit by $ 0 c. The company as a whole will have a(n) increase in profit by $ 0 b. The Carton Division will have a(n) decrease in profit by $ 0 2015 McGraw-Hill Education. All rights reserved. 11/14/2015 2:52 PM Check Your Work 1 of 1 http://ezto.mheducation.com/hm.tpx Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company's mine to its two steel millsthe Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $300,000 per year, consisting of $0.19 per ton variable cost and $250,000 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 63% of the Transport Services Department's capacity and the Southern Plant requires 37%. During the year, the Transport Services Department actually hauled the following amounts of ore for the two plants: Northern Plant, 112,000 tons; Southern Plant, 65,800 tons. The Transport Services Department incurred $366,000 in cost during the year, of which $53,300 was variable cost and $312,700 was fixed cost. Required: 1. Determine how much of the $53,300 in variable cost should be charged to each plant. Variable cost charged to Northern Plant Variable cost charged to Southern Plant $ $ 21,280 12,502 2. Determine how much of the $312,700 in fixed cost should be charged to each plant. Fixed cost charged to Northern Plant Fixed cost charged to Southern Plant $ $ 189,000 111,000 3. Should any of the $366,000 in the Transport Services Department cost not be charged to the plants? Unallocated cost $ 6,818 2015 McGraw-Hill Education. All rights reserved. 11/14/2015 3:07 PM Check Your Work 1 of 3 http://ezto.mheducation.com/hm.tpx 11/14/2015 3:17 PM Check Your Work 2 of 3 http://ezto.mheducation.com/hm.tpx Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Cash Accounts receivable Inventory Plant and equipment, net Investment in Buisson, S.A. Land (undeveloped) Assets Beginning Balance Ending Balance $ 137,000 $ 129,000 347,000 488,000 562,000 479,000 854,000 844,000 406,000 433,000 254,000 246,000 Total assets $ 2,560,000 $ 2,619,000 Liabilities and Stockholders' Equity Accounts payable $ 380,000 $ 349,000 Long-term debt 1,042,000 1,042,000 Stockholders' equity 1,138,000 1,228,000 Total liabilities and stockholders' equity Joel de Paris, Inc. Income Statement Sales Operating expenses Net operating income Interest and taxes: Interest expense Tax expense Net income $ 2,560,000 $ 2,619,000 $ 4,608,000 3,778,560 829,440 $ 119,000 195,000 314,000 $ 515,440 The company paid dividends of $425,440 last year. The \"Investment in Buisson, S.A.,\" on the balance sheet represents an investment in the stock of another company. Required: 1. Compute the company's margin, turnover, and return on investment (ROI) for last year. (Round your answers to 2 decimal places.) 11/14/2015 3:17 PM Check Your Work 3 of 3 http://ezto.mheducation.com/hm.tpx 18.00 Turnover % 7.91 Margin % 1.77 ROI 2. The board of directors of Joel de Paris, Inc., has set a minimum required rate of return of 19%. What was the company's residual income last year? Net operating income $ Residual income $ Minimum required return 829,440 216,220 613,220 2015 McGraw-Hill Education. All rights reserved. 11/14/2015 3:17 PM Check Your Work 1 of 2 http://ezto.mheducation.com/hm.tpx 11/14/2015 3:15 PM Check Your Work 2 of 2 http://ezto.mheducation.com/hm.tpx Division A manufactures electronic circuit boards. The boards can be sold either to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: Selling price per circuit board Variable cost per circuit board Number of circuit boards: Produced during the year Sold to outside customers Sold to Division B $192 $117 21,200 15,000 6,200 Sales to Division B were at the same price as sales to outside customers. The circuit boards purchased by Division B were used in an electronic instrument manufactured by that division (one board per instrument). Division B incurred $290 in additional variable cost per instrument and then sold the instruments for $660 each. Required: 1. Prepare income statements for Division A, Division B, and the company as a whole. $ Sales Expenses: Added by the division Net operating income 4,070,400 $ $ 4,049,083 4,092,000 Total Company $ $ 2,988,400 1,103,600 8,162,400 1,819,200 1,190,400 117 21,317 Division B 1,798,000 21,200 Transfer price paid Total expenses Division A 1,190,517 $ 3,009,717 5,152,683 2. Assume that Division A's manufacturing capacity is 21,200 circuit boards. Next year, Division B wants to purchase 7,200 circuit boards from Division A rather than 6,200. (Circuit boards of this type are not available from outside sources.) What should Division A do from the standpoint of the company as a whole? Continue to sell the circuit boards to outside customers. Sell the 1,000 additional circuit boards to Division B. 2015 McGraw-Hill Education. All rights reserved. 11/14/2015 3:15 PM Check Your Work 1 of 4 http://ezto.mheducation.com/hm.tpx 11/14/2015 2:52 PM Check Your Work 2 of 4 http://ezto.mheducation.com/hm.tpx Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the production of various paper goods. Revenue and costs associated with a ton of pulp follow: Selling price Expenses: Variable Fixed (based on a capacity of 99,000 tons per year) $23 $14 6 20 Net operating income $3 Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be treated as a division of Hrubec with full profit responsibility. The newly formed Carton Division is currently purchasing 33,000 tons of pulp per year from a supplier at a cost of $23 per ton, less a 10% purchase discount. Hrubec's president is anxious for the Carton Division to begin purchasing its pulp from the Pulp Division if an acceptable transfer price can be worked out. Required: For (1) and (2) below, assume that the Pulp Division can sell all of its pulp to outside customers for $23 per ton. 1-a. What is the minimum transfer price for Carton Division? Variable cost per unit Total contribution margin on lost sales No. of units transferred Transfer price $ 0 0 $ $ 0 0 0 1-b. What is the maximum transfer price that Pulp Division is ready to pay? (Round your answer to 2 decimal places.) Maximum transfer price $ 23.00 1-c. Are the managers of the Carton and Pulp Divisions likely to voluntarily agree to a transfer price for 33,000 tons of pulp next year? No Yes 2. If the Pulp Division meets the price that the Carton Division is currently paying to its supplier and sells 33,000 tons of pulp to the Carton Division each year, what will be the effect on the profits of the Pulp Division, the Carton Division, and the company as a whole? 11/14/2015 2:52 PM Check Your Work 3 of 4 http://ezto.mheducation.com/hm.tpx a. Profits of the Pulp Division will decrease by $ c. Profits of the company as a whole will decrease by $ b. Profits of the Carton Division will remain unchanged by $ 0 0 0 For (3)-(6) below, assume that the Pulp Division is currently selling only 57,000 tons of pulp each year to outside customers at the stated $23 price. 3a. What is the minimum transfer price for Pulp Division? Minimum transfer price $ 14 3-b. What is the range of transfer price the manager's of both divisions should agree? (Round your answers to 2 decimal places.) The lowest transfer price would be $ 14.00 and the highest transfer price would be $ 23.00 3-c. Are the managers of the Carton and Pulp Divisions likely to voluntarily agree to a transfer price for 33,000 tons of pulp next year? No Yes 4-a. Suppose that the Carton Division's outside supplier drops its price (net of the purchase discount) to only $19 per ton. Should the Pulp Division meet this price? No Yes 4-b. How much potential profit will the Pulp Division lose if the $19 price is not met? Profit of the company will decrease by $ 165,000 5. Refer to (4) above. If the Pulp Division refuses to meet the $19 price, should the Carton Division be required to purchase from the Pulp Division at a higher price for the good of the company as a whole? No Yes 6. Refer to (4) above. Assume that due to inflexible management policies, the Carton Division is required to purchase 33,000 tons of pulp each year from the Pulp Division at $23 per ton. What will be the effect on the profits of the company as a whole? 11/14/2015 2:52 PM Check Your Work 4 of 4 http://ezto.mheducation.com/hm.tpx a. The Pulp Division will have a(n) increase in profit by $ 0 c. The company as a whole will have a(n) increase in profit by $ 0 b. The Carton Division will have a(n) decrease in profit by $ 0 2015 McGraw-Hill Education. All rights reserved. 11/14/2015 2:52 PM Check Your Work 1 of 1 http://ezto.mheducation.com/hm.tpx Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company's mine to its two steel millsthe Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $300,000 per year, consisting of $0.19 per ton variable cost and $250,000 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, the Northern Plant requires 63% of the Transport Services Department's capacity and the Southern Plant requires 37%. During the year, the Transport Services Department actually hauled the following amounts of ore for the two plants: Northern Plant, 112,000 tons; Southern Plant, 65,800 tons. The Transport Services Department incurred $366,000 in cost during the year, of which $53,300 was variable cost and $312,700 was fixed cost. Required: 1. Determine how much of the $53,300 in variable cost should be charged to each plant. Variable cost charged to Northern Plant Variable cost charged to Southern Plant $ $ 21,280 12,502 2. Determine how much of the $312,700 in fixed cost should be charged to each plant. Fixed cost charged to Northern Plant Fixed cost charged to Southern Plant $ $ 189,000 111,000 3. Should any of the $366,000 in the Transport Services Department cost not be charged to the plants? Unallocated cost $ 6,818 2015 McGraw-Hill Education. All rights reserved. 11/14/2015 3:07 PM