Please complete module 23 answers. The topic is Managerial Accounting :)

Question 1 Appropriate Transfer Prices: Opportunity Costs Plains Peanut Butter Company recently acquired a peanut-processing company that has a normal annual capacity of 4,000,000 pounds and that sold 2,800,000 pounds last year at a price of $2.00 per pound. The purpose of the acquisition is to furnish peanuts for the peanut butter plant, which needs 1,600,000 pounds of peanuts per year. It has been purchasing peanuts from suppliers at the market price. Production costs per pound of the peanut-processing company are as follows: Direct materials Direct labor Variable overhead Fixed overhead at normal capacity Total $0.50 0.24 0.12 0.22 $1.08 Management is trying to decide what transfer price to use for sales from the newly acquired Peanut Division to the Peanut Butter Division. The manager of the Peanut Division argues that $2.00, the market price, is appropriate. The manager of the Peanut Butter Division argues that the cost price of $1.08 (or perhaps even less) should be used since fixed overhead costs should be recomputed. Any output of the Peanut Division up to 2,800,000 pounds that is not sold to the Peanut Butter Division could be sold to regular customers at $2.00 per pound. (a) Compute the annual gross profit for the Peanut Division using a transfer price of $2.00. $Answer (b) Compute the annual gross profit for the Peanut Division using a transfer price of $1.08. $Answer (c) Which of the following is least likely to motivate the manager to take actions that will maximize corporate profits? Set the transfer price at 2.00 for all transfers. Set the transfer price at .86 for all transfers. Set the transfer price at .86 for the first 1,200,000 lbs. transferred. Set the transfer price at .86 for the first 1,200,000 lbs. transferred, and at 2.00 for the next 400,000 lbs. transferred. None of the above. Question 2 Dual Transfer Pricing The Greek Company has two divisions, Beta and Gamma. Gamma Division produces a product at a variable cost of $6 per unit, and sells 160,000 units to outside customers at $10 per unit and 50,000 units to Beta Division at variable cost plus 40 percent. Under the dual transfer price system, Beta Division pays only the variable cost per unit. Gamma Division's fixed costs are $230,000 per year. Beta Division sells its finished product to outside customers at $23 per unit. Beta has variable costs of $5 per unit, in addition to the costs from Gamma Division. Beta Division's annual fixed costs are $160,000. There are no beginning or ending inventories. (a) Prepare the income statements for the two divisions and the company as a whole. Do not use negative signs with your answers. Greek Company Divisional Income Statement Beta Gamma Company Sales: External $Answer $Answer $Answer 0 Answer 0 Answer 0 Internal Answer Answer 0 Answer 0 Total 0 0 Answer 0 0 Variable costs: Incurred Answer Answer 0 Answer Answer 0 Transferred in Answer Total Answer 0 Answer 0 Answer 0 0 0 Answer 0 0 Contribution margin Greek Company Divisional Income Statement Beta Gamma Answer Answer 0 0 Answer Answer 0 $Answer 0 $Answer 0 Net income 0 Answer 0 Fixed costs Company Answer $Answer 0 0 (b) When preparing divisional income statements for a two-division company where one division sales some product internally to the other division, the sum of the net incomes of the two divisions will always equal the total net income of the company. Answer: True OR False Question 3 ROI and Residual Income: Basic Computations Watkins Associated Industries is a highly diversified company with three divisions: Trucking, Seafood, and Construction. Assume that the company uses return on investment and residual income as two of the evaluation tools for division managers. The company has a minimum desired rate of return on investment of 10 percent with a 30 percent tax rate. Selected operating data for three divisions of the company follow. Trucking Division Seafood Division Construction Division Sales $1,200,000 $810,000 $900,000 Operating assets 600,000 270,000 340,000 Net operating income 97,000 53,000 55,000 (a) Compute the return on investment for each division. (Round answers to three decimal places.) Trucking ROI = Answer 0 Seafood ROI = Answer 0 Construction ROI = Answer 0 (b) Compute the residual income for each division. Residual Income Trucking Seafood $Answer $Answer Net operating income 0 0 Minimum level Residual income Answer Answer 0 Construction $Answer 0 Answer 0 $Answer 0 $Answer 0 $Answer 0 0 (c) Which of the following is an appropriate statement about the performance of the three divisions: Trucking has the superior performance. Seafood has the superior performance. Construction has the superior performance. Residual income is always superior to ROI for assessing performance. Which division has the superior performance depends on which performance evaluation metric is used to assess performance. Question 4 Internal or External Acquisitions: No Opportunity Costs The Van Division of MotoCar Corporation has offered to purchase 180,000 wheels from the Wheel Division for $42 per wheel. At a normal volume of 500,000 wheels per year, production costs per wheel for the Wheel Division are as follows: Direct materials Direct labor Variable overhead Fixed overhead Total $15 10 5 19 $49 The Wheel Division has been selling 500,000 wheels per year to outside buyers at $59 each. Capacity is 700,000 wheels per year. The Van Division has been buying wheels from outside suppliers at $55 per wheel. (a) Calculate the net benefit (or cost) to the Wheel Division of accepting the offer from the Van Division. $Answer per wheel (b) Calculate the net benefit (or cost) to Motocar Corp. if the Wheel Division accepts the offer from the Van Division. $Answer per wheel Answer 1 a Peanut Division 4,000,000 $ 2.00 8,000,000 Sales in units pounds Selling Price per pound Sales Revenue Costs: Direct Materials Direct Labor Variable OH Total variable costs Contribution Margin Fixed OH Net Income 2,000,000 960,000 480,000 3,440,000 4,560,000 880,000 3,680,000 b Peanut Division 4,000,000 2 and 1.08 6,528,000 Sales in units pounds Selling Price per pound Sales Revenue Costs: Direct Materials Direct Labor Variable OH Total variable costs Contribution Margin Fixed OH Net Income 2,000,000 960,000 480,000 3,440,000 3,088,000 880,000 2,208,000 Set the transfer price at 2.00 for all transfers. c 2 Greek Company Division Income Statement Beta a Sales: Exyernal Internal Total Variable Costs: Incurred Transferred In Total Contribution Margin Fixed Costs Gama 1,150,000 1,150,000 1,600,000 420,000 2,020,000 250,000 420,000 670,000 480,000 160,000 1,260,000 1,260,000 760,000 230,000 Company 2,750,000 2,750,000 1,510,000 1,510,000 1,240,000 390,000 Net Income b 530,000 850,000 - 3 Sales Operating Assets Net Operating Income Less Income Tax Net Income ROI a 320,000 Trucking Seafood Construction 1,200,000 810,000 900,000 600,000 270,000 340,000 97,000 53,000 55,000 29,100 15,900 16,500 67,900 37,100 38,500 11.32% 13.74% 11.32% Trucking ROI 11.32% Seafood ROI 13.74% Construction ROI 11.32% b Residual Income Net Operating Income Minimum Lavel Residual Income Trucking Seafood Construction 97,000 53,000 55,000 60,000 27,000 34,000 37,000 26,000 21,000 c Which division has the superior performance depends on which performance evaluation metric is used to assess p 4 Motor Car Corporation Wheel Division Present Sales in Units: Sales Revenue Variable Costs: Direct Materials Direct Labor Variable OH Total variable Costs Fixed OH Operating Income a net benefit/( costs) $ Wheel Division Proposed 500,000 29,500,000 680,000 37,060,000 7,500,000 5,000,000 2,500,000 15,000,000 9,500,000 5,500,000 10,200,000 6,800,000 3,400,000 20,400,000 9,500,000 10,900,000 30.00 per wheel b Present Operating Income of Wheel Division Van Division Buying Costs Less Variable Mfg. costs if tfd from wheel div Net benefit/(Costs) to company 5,500,000 $ 9,900,000 5,400,000 25.00 per wheel metric is used to assess performance. \fAnswer 1 a Peanut Division 4,000,000 $ 2.00 8,000,000 Sales in units pounds Selling Price per pound Sales Revenue Costs: Direct Materials Direct Labor Variable OH Total variable costs Contribution Margin Fixed OH Net Income 2,000,000 960,000 480,000 3,440,000 4,560,000 880,000 3,680,000 b Peanut Division 4,000,000 2 and 1.08 6,528,000 Sales in units pounds Selling Price per pound Sales Revenue Costs: Direct Materials Direct Labor Variable OH Total variable costs Contribution Margin Fixed OH Net Income 2,000,000 960,000 480,000 3,440,000 3,088,000 880,000 2,208,000 Set the transfer price at 2.00 for all transfers. c 2 Greek Company Division Income Statement Beta a Sales: Exyernal Internal Total Variable Costs: Incurred Transferred In Total Contribution Margin Fixed Costs Gama 1,150,000 1,150,000 1,600,000 420,000 2,020,000 250,000 300,000 550,000 600,000 160,000 1,260,000 1,260,000 760,000 230,000 Company 2,750,000 2,750,000 1,510,000 1,510,000 1,240,000 390,000 Net Income b 530,000 850,000 - 3 Sales Operating Assets Net Operating Income ROI a 440,000 Trucking Seafood Construction 1,200,000 810,000 900,000 600,000 270,000 340,000 97,000 53,000 55,000 16.167% 19.630% 16.176% Trucking ROI 16.167% Seafood ROI 19.630% Construction ROI 16.176% b Residual Income Net Operating Income Minimum Lavel Residual Income Trucking Seafood Construction 97,000 53,000 55,000 60,000 27,000 34,000 37,000 26,000 21,000 c Which division has the superior performance depends on which performance evaluation metric is used to assess p 4 Motor Car Corporation Wheel Division Present Sales in Units: Sales Revenue Variable Costs: Direct Materials Direct Labor Variable OH Total variable Costs Fixed OH Operating Income a net benefit/( costs) $ Wheel Division Proposed 500,000 29,500,000 680,000 37,060,000 7,500,000 5,000,000 2,500,000 15,000,000 9,500,000 5,500,000 10,200,000 6,800,000 3,400,000 20,400,000 9,500,000 10,900,000 30.00 per wheel b Present Operating Income of Wheel Division Van Division Buying Costs Less Variable Mfg. costs if tfd from wheel div Net benefit/(Costs) to company 5,500,000 $ 9,900,000 5,400,000 25.00 per wheel metric is used to assess performance. 30