1. Compute the minimum transfer price that Green Yard should be required to accept.2. Compute the increase (decrease) in total contribution margin for Lawn Supplies, Inc. for this transfer. Green Yard Company, a division of Lawn Supplies, Inc., produces lawn mowers. Green Yardsells lawn mowers to home improvement stores, as well as to Lawn Supplies, Inc. Thefollowing information is available for Green Yard's mowers:Fixed cost per unit $180Variable cost perunitSelling price perunit120450Lawn Supplies, Inc. can purchase comparable lawn mowers from an outside supplier for$400. In order to ensure a reliable supply, the management of Lawn Supplies, Inc. orderedGreen Yard to provide 100,000 lawn mowers per year at a transfer price of $400 per unit.Green Yard is currently operating at full capacity. It could avoid $8 per unit of variable sellingcosts by selling internally.

Transfer Price:-It is the price that one department charges from another department of the same…

Answered: Compute the minimum transfer price that…

Compute the minimum transfer price that Green Yard should be required to accept. 2. Compute the increase (decrease) in total contribution margin for Lawn Supplies, Inc. for this transfer.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter5: Activity-based Costing And Management

Section: Chapter Questions

Problem 59P: Activity-Based Supplier Costing Levy Inc. manufactures tractors for agricultural usage. Levy...

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Assume that HASF furniture Inc., as described, currently purchases the chair cushions for its lawn set from an outside vendor for $30 per set. Modern Furniture’s chief operations officer wants an analysis of the comparative costs of manufacturing these cushions to determine whether bringing the manufacturing in-house would save the firm money. Additional information shows that if Modern furniture’s were to manufacture the cushions, the materials cost would be $16 and the labor cost would be $10 per set and that it would have to purchase cutting and sewing equipment, which would add $25,000 to annual fixed costs. Required Computation for 10,000 units What amount should have been inccrued if company produce 10,000 units What amount should have been inccrued if company purhcase 10,000 units from outside What amount company save if company make 10,000 cushions
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Make or Buy Filtration, Inc. manufactures filters for use in secondary water irrigation systems. The costs per unit, for 20,000 filters, are as follows. Direct materials $6.00 Direct labor 7.00 Variable overhead 1.00 Fixed overhead 2.00 Total costs $16.00 Irrigation Products has offered to sell 20,000 filters to Filtration for $16 per filter. If Filtration accepts Irrigation Products’ offer, the facilities used to manufacture filters could be used to produce refrigerator filtration units. Revenues from the sale of refrigerator filtration units are estimated at $54,000, with variable costs amounting to 50% of sales. In addition, $1 per unit of the fixed overhead associated with the manufacture of secondary water irrigation filters could be eliminated. Compute the following: Cost to make filters Answer Cost to buy filters Answer Should Filtration, Inc. accept Irrigation Product’s offer? Yes, the cost to purchase the filters is less than the cost to…
Activity-Based Supplier CostingLevy Inc. manufactures tractors for agricultural usage. Levy purchases the engines neededfor its tractors from two sources: Johnson Engines and Watson Company. The Johnsonengine has a price of $1,000. The Watson engine is $900 per unit. Levy produces andsells 22,000 tractors. Of the 22,000 engines needed for the tractors, 4,000 are purchasedfrom Johnson Engines, and 18,000 are purchased from Watson Company. The production manager, Jamie Murray, prefers the Johnson engine. However, Jan Booth, purchasingmanager, maintains that the price difference is too great to buy more than the 4,000units currently purchased. Booth also wants to maintain a significant connection withthe Johnson source just in case the less expensive source cannot supply the needed quantities. Jamie, however, is convinced that the quality of the Johnson engine is worth theprice difference.Frank Wallace, the controller, has decided to use activity costing to resolve the issue. Thefollowing…
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Premier Printing produces custom labels and stationary for companies. In conducting CVP analysis of its Personalized Package, management decided to determine how many of the packages would need to be sold in order to justify continuing the product line. Management determined that fixed costs direct related to this particular product amounted to $27,000 annually. Premier reported $120,000 of gross sales related to this product and variable product costs of $90,000. Assuming that each Personalized Package sells for $12 per unit, what is the minimum number of Personalized Packages that Premier needs to sell to break even and therefore justify the product line?
Filtration, Inc. manufactures filters for use in secondary water irrigation systems. The costs per unit, for 20,000 filters, are as follows. Direct materials $8.00 Direct labor 9.00 Variable overhead 1.00 Fixed overhead 2.00 Total costs $20.00 Irrigation Products has offered to sell 20,000 filters to Filtration for $20 per filter. If Filtration accepts Irrigation Products’ offer, the facilities used to manufacture filters could be used to produce refrigerator filtration units. Revenues from the sale of refrigerator filtration units are estimated at $57,000, with variable costs amounting to 50% of sales. In addition, $1 per unit of the fixed overhead associated with the manufacture of secondary water irrigation filters could be eliminated. Compute the following: Cost to make filters Answer Cost to buy filters Answer Should Filtration, Inc. accept Irrigation Product’s offer? Yes, the cost to purchase the filters is less than the cost to make them.…
Tulsa Company is a car brake repair and replacement company operating in the after-sales market. Tulsa's purchasing manager uses two suppliers (Stirdulo and Fallimento) for the source of its passenger car brakes. Data relating to brake discs (Discs) and brake pads (Pads) are given below. I. Activity costs Activity Adverse buying* $800,000 Supplier returns* 100,000 II. Supplier Data Stridulo Brakes Fallimento Brakes Discs Pads Discs Pads Unit purchase price $53.75 $148.75 $46.50 $146.50 Units purchased 10,000 10,000 15,000 15,000 Insufficient units 2,000 2,000 6,000 6,000 Returned units 500 500 1,500 1,500 Required: 1. Calculate the activity rates for assigning costs to suppliers. 2. Calculate the total unit purchasing cost for each component for each supplier. 3. What if the quantity of brake pads that can be purchased is limited to 20,000 units from Stridulo and 25,000 units…
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