Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Oriole Company is a multidivisional company. Its managers have full responsibility for profits and complete autonomy to accept or reject transfers from other divisions. Division

image text in transcribedimage text in transcribedimage text in transcribed

Oriole Company is a multidivisional company. Its managers have full responsibility for profits and complete autonomy to accept or reject transfers from other divisions. Division A produces a subassembly part for which there is a competitive market. Division B currently uses this subassembly for a final product that is sold outside at $2,450. Division A charges Division B market price for the part, which is $1,520 per unit. Variable costs are $1,060 and $1,170 for Divisions A and B, respectively. The manager of Division B feels that Division A should transfer the part at a lower price than market because at market, Division B is unable to make a profit. Calculate Division B's contribution margin if transfers are made at the market price, and calculate the company's total contribution margin. (Enter negative amounts use either a negative sign preceding the number eg -45 or parentheses eg (45).) Division B's contribution margin Company's total contribution margin $ per unit per unit Assume that Division A can sell all its production in the open market. Should Division A transfer the goods to Division B? No eTextbook and Media Assume that Division A can sell in the open market only 510 units at $1,520 per unit out of the 1,020 units that it can produce every month. Assume also that a 10% reduction in price is necessary to sell all 1,020 units each month. Compute the contribution margins under following three different alternatives to support your decision. Calculate the Contribution Maring for Division A only. (Round intermediate calculations to 2 decimal places, e.g. 125.25 and final answers to 0 decimal places, e.g. 125.) Alternative 1: Alternative 2: Maintain price, no transfers Cut price, no transfers Assistance Used $ $ Alternative 3: Maintain price and transfers $ Should transfers be made? If so, how many units should the division transfer and at what price? (If no transfer is necessary input 0 units at $0.) The division should tansfer units at $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Handbook Of Asian Finance Financial Markets And Sovereign Wealth Funds

Authors: David Lee, Greg N. Gregoriou

1st Edition

0128009829, 978-0128009826

More Books

Students also viewed these Finance questions

Question

6. Identify seven types of hidden histories.

Answered: 1 week ago

Question

What is human nature?

Answered: 1 week ago