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Please help, Thankyou! Oriole Industries is a decentralized company with two divisions: mining and processing. They are both evaluated as profit centres. The mining division
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Oriole Industries is a decentralized company with two divisions: mining and processing. They are both evaluated as profit centres. The mining division transfers raw diamonds to the processing division. The processing division is currently operating at 1 million kg below its capacity, while the mining division is operating at full capacity. The mining division can sell raw diamonds externally at $77 per kilogram. The unit cost of 1 kg of polished diamonds produced by the processing division is as follows: Raw diamonds $77 Direct materials 10 30 Direct labour ($20/hour) Variable manufacturing overhead 21 Fixed manufacturing overhead* 51 Total unit cost $189 *Based on a capacity of 5.10 million kg per year. The processing division has just received an order from International Diamonds Co. for 310,000 kg of polished diamonds at a price of $175 per kilogram. Oriole has a policy that prohibits selling any product below total cost. The total cost of a kilogram of raw diamonds in the mining division is $61, of which 25% is company fixed costs. Calculate the following for Oriole. (Round "Variable cost of raw diamonds" answer to 2 decimal places, e.g. 25.35.) Variable cost of raw diamonds $ Contribution margin from selling 310,000 kilograms of raw diamonds $ Contribution margin from selling 310,000 kilograms of polished diamonds $ Would Oriole as a whole benefit if the raw diamonds were transferred to the processing division at $61 per kilogram to fill the order from International Diamonds? Calculate the minimum and maximum transfer prices that could be used. (Round answers to 2 decimal places, e.g. 25.35.) Minimum transfer price LA $ Maximum transfer price $ Recommend an appropriate transfer price for raw diamonds sold by the mining division to the processing division. (Round answers to 2 decimal places, e.g. 25.35.) Appropriate transfer price $ If the mining division was not operating at full capacity, calculate the appropriate transfer price. (Round answers to 2 decimal places, e.g. 25.35.) Appropriate transfer price would be between $ $ and $ Would your answer in part (d) be differentStep by Step Solution
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