PART 1: Collyer Products Inc. has a Valve Division that manufactures and sells a standard valve as follows:

• Capacity in units200,000
• Selling price to outside customers on the intermediate market$ 21V
• ariable costs per unit$12
• Fixed costs per unit (based on capacity)$9

Collyer has a Pump Division that could use this valve in the manufacture of one of its pumps. The Pump Division is currently purchasing 20,000 valves per year from an overseas supplier at a cost of $20 per valve.

#1. Assuming that the Valve Division has ample idle capacity to handle all of the Pump Division's needs, what is the acceptable range, if any, for the transfer price between the two divisions?

#2.Assume that the Valve Division is selling all that it can produce to outside customers on the intermediate market. What is the acceptable range, if any, for the transfer price between the two divisions?

PART 2: Arbon Company has three service departments and two operating departments. Selected data concerning the five departments are presented in the attachment "Part #2.png"

The company allocates service department costs by the step-down method in the following order: Administrative (number of employees), Janitorial (space occupied), and Equipment Maintenance (machine-hours).

#1. How do I allocate the service department costs to the operating departments using the step-down method? (Negative amounts should be indicated by a minus sign.)

Arbon Company has three service departments and two operating departments. Selected data concerning the ve departments are presented below: Service Departments Operating Departments Equipment Administrative J anitorialnaintenance Prep Finishing Total Costs $87,000 $67,800 $36,000 $256,100 $498,600 $945,500 Number of employees 80 60 240 600 300 1,280 square maines f 300 1,200 1,000 2,000 7,000 11,500 space occupied Machinehours 16,000 32,000 48,000 The company allocates service department costs by the step-down method in the following order: Administrative (number of employees), Janitorial (space occupied), and Equipment Maintenance (machine- hours). Required: Using the step-down method, allocate the service department costs to the operating departments. (Negative amounts should be indicated by a minus sign.) Departmental costs before allocations Collyer Products Inc. has 3 Valve Division that manufactures and sells a standard valve as follows: Capacity in units 200,000 Selling price to outside customers on the intermediate market $ 21 Variable costs per unit $ 12 Fixed costs per unit (based on capacity) $ 9 The company has a Pump Division that could use this valve in the manufacture of one of its pumps. The Pump Division is currently purchasing 20,000 valves per year from an overseas supplier at a cost of $20 per valve. 1. Assume that the Valve Division has ample idle capacity to handle all of the Pump Division's needs. What is the acceptable range, if any, for the transfer price between the two divisions? m 2. Assume that the Valve Division is selling all that it can produce to outside customers on the intermediate market. What is the acceptable range, if any, for the transfer price between the two divisions? -:l:|