No Transfer

Mr. Bailey has prepared the following divisional income statement for you to review, assuming no transfer of excess capacity hours occurs. He has also included the total amounts for BOR CPAs, Inc. in the rightmost column.

Complete the following Divisional Income Statements with your data from the Payroll.

BOR CPAs, Inc. Divisional Income Statements For the Year Ended December 31, 20Y8
	Audit Division	Tax Division	Total Company
Fees earned:
Audit fees (12 engagements)	$900,000		$900,000
Tax fees (45 engagements)		$708,750	708,750
Transfer-pricing fees			0
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		(40,000)	(40,000)
Audit hours provided by Tax Division		0	0
Fixed expenses	(50,000)	(65,500)	(115,500)
Operating income before support department allocations	$670,000	$367,000	$1,037,000
Support department allocations for payroll	fill in the blank f43e3fffdff8fbc_1	fill in the blank f43e3fffdff8fbc_2	fill in the blank f43e3fffdff8fbc_3
Operating income	$fill in the blank f43e3fffdff8fbc_4	$fill in the blank f43e3fffdff8fbc_5	$fill in the blank f43e3fffdff8fbc_6

Feedback

Market 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 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 $110 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 bdcd7efef07000f_1	fill in the blank bdcd7efef07000f_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 bdcd7efef07000f_3	fill in the blank bdcd7efef07000f_4
Audit hours provided by Tax Division	fill in the blank bdcd7efef07000f_5	fill in the blank bdcd7efef07000f_6	fill in the blank bdcd7efef07000f_7
Fixed expenses	(50,000)	(65,500)	(115,500)
Operating income before support department allocations	$fill in the blank bdcd7efef07000f_8	$fill in the blank bdcd7efef07000f_9	$fill in the blank bdcd7efef07000f_10
Support department allocations for payroll	fill in the blank bdcd7efef07000f_11	fill in the blank bdcd7efef07000f_12	fill in the blank bdcd7efef07000f_13
Operating income	$fill in the blank bdcd7efef07000f_14	$fill in the blank bdcd7efef07000f_15	$fill in the blank bdcd7efef07000f_16

Feedback

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 781af8041004052_1	fill in the blank 781af8041004052_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 781af8041004052_3	fill in the blank 781af8041004052_4
Audit hours provided by Tax Division	fill in the blank 781af8041004052_5	fill in the blank 781af8041004052_6	fill in the blank 781af8041004052_7
Fixed expenses	(50,000)	(65,500)	(115,500)
Operating income before support department allocations	$fill in the blank 781af8041004052_8	$fill in the blank 781af8041004052_9	$fill in the blank 781af8041004052_10
Support department allocations for payroll	fill in the blank 781af8041004052_11	fill in the blank 781af8041004052_12	fill in the blank 781af8041004052_13
Operating income	$fill in the blank 781af8041004052_14	$fill in the blank 781af8041004052_15	$fill in the blank 781af8041004052_16

Feedback

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 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 550bd90e9fff065_1	fill in the blank 550bd90e9fff065_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 550bd90e9fff065_3	fill in the blank 550bd90e9fff065_4
Audit hours provided by Tax Division	fill in the blank 550bd90e9fff065_5	fill in the blank 550bd90e9fff065_6	fill in the blank 550bd90e9fff065_7
Fixed expenses	(50,000)	(65,500)	(115,500)
Operating income before support department allocations	$fill in the blank 550bd90e9fff065_8	$fill in the blank 550bd90e9fff065_9	$fill in the blank 550bd90e9fff065_10
Support department allocations for payroll	fill in the blank 550bd90e9fff065_11	fill in the blank 550bd90e9fff065_12	fill in the blank 550bd90e9fff065_13
Operating income	$fill in the blank 550bd90e9fff065_14	$fill in the blank 550bd90e9fff065_15	$fill in the blank 550bd90e9fff065_16