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, 2018 Audit Division Tax Division Total Company Fees earned: $1,200,000 $1,200,000 Audit fees (16 engagements) Tax fees (45 engagements) Transfer pricing fees $708,750 708,750 Expenses: Variable: (180,000) Audit hours provided by Audit Division Tax hours provided by Tax Division Excess capacity hours paid to salaried staff (180,000) (236,250) (236,250) Audit hours provided by Tax Division Fixed expenses (50,000) (65,500) (115,500) Operating income before support department allocations $ Support department allocations for payroll Operating income $ 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 $50 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 "o". BOR CPAs, Inc. Divisional Income Statements For the Year Ended December 31, 2048 Audit Division Tax Division Total Company Fees earned: Audit fees (16 engagements) $1,200,000 $1,200,000 $708,750 708,750 Tax fees (45 engagements) Transfer pricing fees Expenses: Variable: Audit hours provided by Audit Division (180,000) (180,000) (236,250) Tax hours provided by Tax Division (236,250) Excess capacity hours paid to salaried staff Audit hours provided by Tax Division Fixed expenses (50,000) (65,500) (115,500) Operating income before support department allocations $ Support department allocations for payroll Operating income $ Analysis You are now able to put together all the information you've collected and analyze the data. In the following table, "ROI" stands for "Return on Investment." Complete the following tables using the information from the other requirements and selection lists provided. Audit Division Profit Margin X Investment Turnover = ROI No Transfer X Market Price X Negotiated Price X Cost Price Tax Division Profit Margin Investment Turnover ROI No Transfer Market Price X Negotiated Price X Cost Price BOR CPAs, Inc. Profit Margin X Investment Turnover ROI No Transfer X Market Price Negotiated Price Cost Price 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, 2018 Audit Division Tax Division Total Company Fees earned: $1,200,000 $1,200,000 Audit fees (16 engagements) Tax fees (45 engagements) Transfer pricing fees $708,750 708,750 Expenses: Variable: (180,000) Audit hours provided by Audit Division Tax hours provided by Tax Division Excess capacity hours paid to salaried staff (180,000) (236,250) (236,250) Audit hours provided by Tax Division Fixed expenses (50,000) (65,500) (115,500) Operating income before support department allocations $ Support department allocations for payroll Operating income $ 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 $50 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 "o". BOR CPAs, Inc. Divisional Income Statements For the Year Ended December 31, 2048 Audit Division Tax Division Total Company Fees earned: Audit fees (16 engagements) $1,200,000 $1,200,000 $708,750 708,750 Tax fees (45 engagements) Transfer pricing fees Expenses: Variable: Audit hours provided by Audit Division (180,000) (180,000) (236,250) Tax hours provided by Tax Division (236,250) Excess capacity hours paid to salaried staff Audit hours provided by Tax Division Fixed expenses (50,000) (65,500) (115,500) Operating income before support department allocations $ Support department allocations for payroll Operating income $ Analysis You are now able to put together all the information you've collected and analyze the data. In the following table, "ROI" stands for "Return on Investment." Complete the following tables using the information from the other requirements and selection lists provided. Audit Division Profit Margin X Investment Turnover = ROI No Transfer X Market Price X Negotiated Price X Cost Price Tax Division Profit Margin Investment Turnover ROI No Transfer Market Price X Negotiated Price X Cost Price BOR CPAs, Inc. Profit Margin X Investment Turnover ROI No Transfer X Market Price Negotiated Price Cost Price