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Pacific Mill consists of two operating divisions, a Cutting division and the division. The Cutting division prepares cords of timber at its sawmill, while the
Pacific Mill consists of two operating divisions, a Cutting division and the division. The Cutting division prepares cords of timber at its sawmill, while the A division prepares the cut cords of lumber into board-feet of finished wood (which sold various furniture manufacturers). During the most recent year the 100.000 cords of wood at a cost of $2.200.000. All of this lumber was to the Assembly division, where incremental costs of $12 per cord were added Pacific Mill v/M the 100.000 board-feet of finished wood for $5,800.000. Required: What would the operating income for each of the two divisions be if the tram price from Cutting to Assembly was set at the cord cost of $22 per cord? (Show circulation) What would the operating income for each of the two divisions be if the transfer 18 per cord? (Show calculations.) Since Cutting transfers all of its output internally (to Assembly), does the manager of cutting care what price is selected? Why? Should Cutting be treated as a cost center under the circumstances (rather than a profit center or investment center)? explain
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