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 $80 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 ac16e7046f9c07b_1	fill in the blank ac16e7046f9c07b_2
Expenses:
Variable:
Audit hours provided by Audit Division	(180,000)		(180,000)
Tax hours provided by Tax Division		(236,250)	(236,250)
Excess capacity hours paid to salaried staff		fill in the blank ac16e7046f9c07b_3	fill in the blank ac16e7046f9c07b_4
Audit hours provided by Tax Division	fill in the blank ac16e7046f9c07b_5	fill in the blank ac16e7046f9c07b_6	fill in the blank ac16e7046f9c07b_7
Fixed expenses	(50,000)	(65,500)	(115,500)
Operating income before support department allocations	$fill in the blank ac16e7046f9c07b_8	$fill in the blank ac16e7046f9c07b_9	$fill in the blank ac16e7046f9c07b_10
Support department allocations for payroll	fill in the blank ac16e7046f9c07b_11	fill in the blank ac16e7046f9c07b_12	fill in the blank ac16e7046f9c07b_13
Operating income	$fill in the blank ac16e7046f9c07b_14	$fill in the blank ac16e7046f9c07b_15	$fill in the blank ac16e7046f9c07b_16