Question
Kite.co makes kites. Its standards are 5.2 hours of work at $46 per hour per kite. In March, employees worked 5,000 hours, made 850 kites
- Kite.co makes kites. Its standards are 5.2 hours of work at $46 per hour per kite. In March, employees worked 5,000 hours, made 850 kites and earned $272,300 in wages. Calculate the labor rate and efficiency variances. Create a STORYthat could be the cause of these variances.
- Unicycle.co has two divisions: wheels and unicycles. Each unicycle needs one wheel. Fixed costs = 0.
| Wheels | Unicycles |
Sales/Market Price | $15 per wheel | $350 per unicycle |
VC | $6.25 per wheel | $65.50 per unicycle, not including the cost of wheels (one wheel per unicycle) |
Items sold to outside market | 915 wheels per month | 420 per month |
Capacity | 1200 wheels per month |
|
1.If there were no tax implications, what range of transfer prices would instill goal congruence?
2. If the Unicycle division is in Canada, where the marginal tax rate is 23.6%, and the Wheel division is in the U.S., where the marginal tax rate is 35.8%, what transfer price (within the range you identified in #1) will the company prefer?
3. Calculate the tax savings to the company if it uses the transfer price you calculated in #2 instead of the transfer price at the opposite end of the range you calculated in #1.
- Icecream.co sells ice cream cones and ice cream sundaes. The only constraint is that employees can only work 400 hours per week. Hungryco would like to order 1020 ice cream sundaes and pay $7.25 each for them. Should Icecreamco take Hungrycos order? (Its all or nothing: Icecream.co will not accept a partial order.) Show your work.
| Ice Cream Cones | Ice Cream Sundaes |
Price | $4.25 | $9 |
VC | $2.19 | $2.85 |
Time required to make | 3 minutes | 5 minutes |
Current sales volume | 5890 cones per week | 360 sundaes per week |
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