Answered step by step
Verified Expert Solution
Question
...
1 Approved Answer
Flounder Consolidated has several divisions, two of which transfer their products to other divisions. The Mining division refines toldine, which it then transfers to the
Flounder Consolidated has several divisions, two of which transfer their products to other divisions. The Mining division refines toldine, which it then transfers to the Metals division. The Metals division processes the toldine into an alloy and sells it to customers at a price of $151 per barrel. Flounder currently requires the Mining division to transfer its total annual output of 415,700 barrels of toidine to the Metals division at tatal manufacturing cost plus 10%. Unlimited quantities of toldine can be purchased and sold on the open market at $91 per barrel. While the Mining division could sell all the toldinc it produces on the open market at 591 per barrel, it would incur a variable selling cost of $5 per unit to do so. Barket Jonas manager of the Mining division, is unhappy with having to transfer the division's entire output of toldine to the Metals division at 110% of cost. In a meeting with the management of Flounder, he protested. "Why should my division be required to sell tolding to the Metals Division at less than market price. For the year just ended in May. Metals contribution margin was over $19 million on sales of 415,700 barrels, while Mining's contribution on the transfer of the same number of units was just over $5 million, My division is subsidizing the profitability of the Metals division. We should be allowed to charge market price for toldine when we transfer it to the Metals division Detailed unit costs for both the Mining and Metals divisions follow Mining Division Metals Division | Sod 8 Transfer price from Mining division Direct material Direct labor Manufacturing overhead Total cost per barrel $12 16 32 20 24 $60 $118 Manufacturing overhead cost in the Mining divisionis variable fixed and 75% variable. In the Metals division, it is 80% fixed and 40% (6) Using the market price as the transfer price determine the contribution margins for both divisions for the last focal year (Round intermediate calendations to 2 decimal places, es 12.25 and finanswers to decimal noces. 125.) Mining Metals s Total contribution martin 1286200 $ 3325000 (cu Flounder Consolidated were to institute negotiated transfer prices and allow divisions to buy and sell on the open market what price range for toldine would be acceptable to both division? $ 52 Minimum transfer price that mining will accept S 86 Maximum price that metals will pay
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/07/6685bcb54e394_6286685bcb4c1ca4.jpg)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started