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The Compressor Division and the Fabrication Division of Plash Company, which exclusively produces one type of washing machine, respectively, are its two divisions. For the Fabrication Division, which completes the washing machine and sells it to retailers, the Compressor Division makes compressors. The Fabrication Division buys compressors from the Compressor Division. The Fabrication Division will spend $40.00 on a compressor, which is the market price. (Skip updates to the inventory.) It is expected that the fixed costs for the Compressor Division remain constant for orders between 5,000 and 10,000 units. The Fabrication Division's fixed expenses are estimated to be $7.50 per unit at 10,000 units. Compressor's costs per compressor are: Direct materials Direct labor Variable overhead Division fixed costs Fabrication's costs per completed air conditioner are: Direct materials $15.00 $7.25 $3.00 $7.50 $150.00 $62.50 $20.00 $7.50 Assume that 1,000 compressors are built and transferred to the Fabrication Division at a transfer price that is equal to 150 percent of the Compressor Division's total expenses. The operational income of the Compressor Division comprises a $15 875 a b $18 250 c $16.375 d $17 375 Direct labor Variable overhead Division fixed costs

The Compressor Division and the Fabrication Division of Plash Company, which exclusively produces one type of washing machine, respectively, are its two divisions. For the Fabrication Division, which completes the washing machine and sells it to retailers, the Compressor Division makes compressors. The Fabrication Division buys compressors from the Compressor Division. The Fabrication Division will spend $40.00 on a compressor, which is the market price. (Skip updates to the inventory.) It is expected that the fixed costs for the Compressor Division remain constant for orders between 5,000 and 10,000 units. The Fabrication Division's fixed expenses are estimated to be $7.50 per unit at 10,000 units. Compressor's costs per compressor are: Direct materials Direct labor Variable overhead Division fixed costs Fabrication's costs per completed air conditioner are: Direct materials $15.00 $7.25 $3.00 $7.50 $150.00 $62.50 $20.00 $7.50 Assume that 1,000 compressors are built and transferred to the Fabrication Division at a transfer price that is equal to 150 percent of the Compressor Division's total expenses. The operational income of the Compressor Division comprises a $15 875 a b $18 250 c $16.375 d $17 375 Direct labor Variable overhead Division fixed costs

Managerial Accounting: The Cornerstone of Business Decision-Making
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
Chapter11: Performance Evaluation And Decentralization
Section: Chapter Questions
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The Compressor Division and the Fabrication Division of Plash Company, which exclusively produces one type of washing machine, respectively, are its two divisions. For the Fabrication Division, which completes the washing machine and sells it to retailers, the Compressor Division makes compressors. The Fabrication Division buys compressors from the Compressor Division. The Fabrication Division will spend $40.00 on a compressor, which is the market price. (Skip updates to the inventory.) It is expected that the fixed costs for the Compressor Division remain constant for orders between 5,000 and 10,000 units. The Fabrication Division's fixed expenses are estimated to be $7.50 per unit at 10,000 units. Compressor's costs per compressor are: Direct materials $15.00 Direct labor $7.25 Variable overhead $3.00 Division fixed costs $7.50 Fabrication's costs per completed air conditioner are: Direct materials $150.00 Direct labor $62.50 Variable overhead $20.00 Division fixed costs $7.50 Assume that 1,000 compressors are built and transferred to the Fabrication Division at a transfer price that is equal to 150 percent of the Compressor Division's total expenses. The operational income of the Compressor Division comprises a. $15,875 a. b. $18,250 c. $16,375 d. $17,375
Transcribed Image Text:The Compressor Division and the Fabrication Division of Plash Company, which exclusively produces one type of washing machine, respectively, are its two divisions. For the Fabrication Division, which completes the washing machine and sells it to retailers, the Compressor Division makes compressors. The Fabrication Division buys compressors from the Compressor Division. The Fabrication Division will spend $40.00 on a compressor, which is the market price. (Skip updates to the inventory.) It is expected that the fixed costs for the Compressor Division remain constant for orders between 5,000 and 10,000 units. The Fabrication Division's fixed expenses are estimated to be $7.50 per unit at 10,000 units. Compressor's costs per compressor are: Direct materials $15.00 Direct labor $7.25 Variable overhead $3.00 Division fixed costs $7.50 Fabrication's costs per completed air conditioner are: Direct materials $150.00 Direct labor $62.50 Variable overhead $20.00 Division fixed costs $7.50 Assume that 1,000 compressors are built and transferred to the Fabrication Division at a transfer price that is equal to 150 percent of the Compressor Division's total expenses. The operational income of the Compressor Division comprises a. $15,875 a. b. $18,250 c. $16,375 d. $17,375
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