Market Transfer Price

The following chart shows some basic data for the company:

Hourly market rate for staff (the price the company would have to pay from an outside contractor for staff services)	$100
Average hourly cost rate for staff (the average price the company pays to its staff)	$60
Number of paychecks issued by Audit Division	110
Number of paychecks issued by Tax Division	340
Total expense for Payroll Office	$29,250
Amount of assets invested in Audit Division by BOR CPAs, Inc.	$10,000,000
Amount of assets invested in Tax Division by BOR CPAs, Inc.	$5,000,000

Mr. Bailey asks that you prepare Divisional Income Statements showing what 20Y8 results would have been had the Audit Division purchased all the excess capacity of the Tax Division, using a market transfer price. The divisional managers tell you that, with the excess capacity of the Tax Division of 800 hours, the Audit Division can perform 4 more audits during the year, and the Tax Division would charge the Audit Division the market rate of $100 per hour for the additional hours required, selling all its excess capacity to the Audit Division. The Tax Division would still be responsible for paying the salaries of their employees.

Complete the following Divisional Income Statements. If there is no amount or an amount is zero, enter 0.

BOR CPAs, Inc. Divisional Income Statements For the Year Ended December 31, 20Y8
	Audit Division	Tax Division	Total Company
Fees earned:
Audit fees (16 engagements)	$1,200,000		$1,200,000
Tax fees (45 engagements)		$708,750	708,750
Transfer-pricing fees		fill in the blank e7914ffa9fa4f8e_1	fill in the blank e7914ffa9fa4f8e_2
Expenses:
Variable:
Audit hours provided by Audit Division	(216,000)		(216,000)
Tax hours provided by Tax Division		(283,500)	(283,500)
Excess capacity hours paid to salaried staff		fill in the blank e7914ffa9fa4f8e_3	fill in the blank e7914ffa9fa4f8e_4
Audit hours provided by Tax Division	fill in the blank e7914ffa9fa4f8e_5	fill in the blank e7914ffa9fa4f8e_6	fill in the blank e7914ffa9fa4f8e_7
Fixed expenses	(50,000)	(65,500)	(115,500)
Operating income before support department allocations	$fill in the blank e7914ffa9fa4f8e_8	$fill in the blank e7914ffa9fa4f8e_9	$fill in the blank e7914ffa9fa4f8e_10
Support department allocations for payroll	fill in the blank e7914ffa9fa4f8e_11	fill in the blank e7914ffa9fa4f8e_12	fill in the blank e7914ffa9fa4f8e_13
Operating income	$fill in the blank e7914ffa9fa4f8e_14	$fill in the blank e7914ffa9fa4f8e_15	$fill in the blank e7914ffa9fa4f8e_16

Negotiated Transfer Price

Mr. Bailey asks that you prepare Divisional Income Statements showing what 20Y8 results would have been had the Audit Division purchased all the excess capacity of the Tax Division, using a negotiated transfer price. The divisional managers tell you that, with the excess capacity of the Tax Division of 800 hours, the Audit Division can perform 4 more audits during the year, and the Audit Division would agree to a negotiated rate of $90 per hour to be paid to the Tax Division for the additional hours required, with the Tax Division selling all its excess capacity to the Audit Division. The Tax Division would still be responsible for paying the salaries of their employees.

Complete the following Divisional Income Statements. If there is no amount or an amount is zero, enter 0.

BOR CPAs, Inc. Divisional Income Statements For the Year Ended December 31, 20Y8
	Audit Division	Tax Division	Total Company
Fees earned:
Audit fees (16 engagements)	$1,200,000		$1,200,000
Tax fees (45 engagements)		$708,750	708,750
Transfer-pricing fees		fill in the blank f90b4bfbef96f8d_1	fill in the blank f90b4bfbef96f8d_2
Expenses:
Variable:
Audit hours provided by Audit Division	(216,000)		(216,000)
Tax hours provided by Tax Division		(283,500)	(283,500)
Excess capacity hours paid to salaried staff		fill in the blank f90b4bfbef96f8d_3	fill in the blank f90b4bfbef96f8d_4
Audit hours provided by Tax Division	fill in the blank f90b4bfbef96f8d_5	fill in the blank f90b4bfbef96f8d_6	fill in the blank f90b4bfbef96f8d_7
Fixed expenses	(50,000)	(65,500)	(115,500)
Operating income before support department allocations	$fill in the blank f90b4bfbef96f8d_8	$fill in the blank f90b4bfbef96f8d_9	$fill in the blank f90b4bfbef96f8d_10
Support department allocations for payroll	fill in the blank f90b4bfbef96f8d_11	fill in the blank f90b4bfbef96f8d_12	fill in the blank f90b4bfbef96f8d_13
Operating income	$fill in the blank f90b4bfbef96f8d_14

Cost Transfer Price

Mr. Bailey asks that you prepare Divisional Income Statements showing what 20Y8 results would have been had the Audit Division purchased all the excess capacity of the Tax Division, using a cost transfer price. The divisional managers tell you that, with the excess capacity of the Tax Division of 800 hours, the Audit Division can perform 4 more audits during the year, and the Audit Division would pay the Tax Division's internal hourly rate of $60 per hour for the additional hours required, with the Tax Division selling all its excess capacity to the Audit Division. The Tax Division would still be responsible for paying the salaries of their employees.

Complete the following Divisional Income Statements. If there is no amount or an amount is zero, enter 0.

BOR CPAs, Inc. Divisional Income Statements For the Year Ended December 31, 20Y8
	Audit Division	Tax Division	Total Company
Fees earned:
Audit fees (16 engagements)	$1,200,000		$1,200,000
Tax fees (45 engagements)		$708,750	708,750
Transfer-pricing fees		fill in the blank d62f7cf6efdff85_1	fill in the blank d62f7cf6efdff85_2
Expenses:
Variable:
Audit hours provided by Audit Division	(216,000)		(216,000)
Tax hours provided by Tax Division		(283,500)	(283,500)
Excess capacity hours paid to salaried staff		fill in the blank d62f7cf6efdff85_3	fill in the blank d62f7cf6efdff85_4
Audit hours provided by Tax Division	fill in the blank d62f7cf6efdff85_5	fill in the blank d62f7cf6efdff85_6	fill in the blank d62f7cf6efdff85_7
Fixed expenses	(50,000)	(65,500)	(115,500)
Operating income before support department allocations	$fill in the blank d62f7cf6efdff85_8	$fill in the blank d62f7cf6efdff85_9	$fill in the blank d62f7cf6efdff85_10
Support department allocations for payroll	fill in the blank d62f7cf6efdff85_11	fill in the blank d62f7cf6efdff85_12	fill in the blank d62f7cf6efdff85_13
Operating income	$fill in the blank d62f7cf6efdff85_14	$fill in the blank d62f7cf6efdff85_15	$fill in the blank d62f7cf6efdff85_16