MANAGERIAL ACCOUNTING (ACCESS) >C<
22nd Edition
ISBN: 9781307839319
Author: Garrison
Publisher: MCG/CREATE
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Chapter 11, Problem 7E
1.
To determine
Introduction: Net operating income (NOI) is a measure of profitability wherein expenses are deducted from sales. The interest and taxes are not taken into consideration while computing NOI. It reveals the company's income from core activities.
The net operating income earned by each division and company as a whole.
2.
To determine
Introduction: Transfer price is the price charged by one department of a company to another department when goods or services are transferred. For example, Department A and Department B are the two departments of Company F. Department A produces Raw Material X, which is an input for Department B's final product. If Departments A and B agree to an inter-departmental transfer of Raw Material X, it will take place at a transfer price agreed upon by the managers of both departments.
To explain: Whether Division A should sell additional 1,000 units to Division B or not and provide its reasoning.
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Exercise 7 (Transfer Pricing from Viewpoint of the Entire Company)
Division E manufactures picture tubes for TVs. The tubes can be sold either
to Division F of the same company or to outside customers. Last year, the
following activity was recorded in Division E:
Selling price per tube..
Production cost per tube...
P175
P130
Number of tubes:
Produced during the year
20,000
16,000
4,000
Sold to outside customers
Sold to Division F.
Sales to Division F were at the same price as sales to outside customers. The
tubes purchased by Division F were used in a TV set manufactured by that
division. Division F incurred P300 in additional cost per TV and then sold
the TVs for P600 each.
Required:
1. Prepare income statements for last year for Division E, Division F, and
the company as a whole.
2. Assume that Division E's manufacturing capacity is 20,000 tubes per
year. Next year, Division F wants to purchase 5,000 tubes from Division
E, rather than only 4,000 tubes as in last year. (Tubes of this…
Exercise 15-32 (Algo) International Transfer Prices (LO 15-4)
San Jose Company operates a Manufacturing Division and an Assembly Division. Both divisions are evaluated as profit centers. Assembly buys components from Manufacturing and assembles them for sale. Manufacturing sells many components to third parties in addition to Assembly. Selected data from the two operations follow.
Manufacturing
Assembly
Capacity (units)
402,000
202,000
Sales pricea
$
404
$
1,310
Variable costsb
$
170
$
484
Fixed costs
$
40,020,000
$
24,020,000
a For Manufacturing, this is the price to third parties.
b For Assembly, this does not include the transfer price paid to Manufacturing.
Suppose Manufacturing is located in Country A with a tax rate of 70 percent and Assembly in Country B with a tax rate of 30 percent. All other facts remain the same.
Required:
a. Current production levels in Manufacturing are 202,000 units. Assembly requests an additional…
QS 22-19 (Algo) Determining transfer prices with excess capacity LO C1
The Windshield division of Jaguar Company makes windshields for use in its Assembly division. The Windshield division incurs
variable costs of $296 per windshield and has capacity to make 590,000 windshields per year. The market price is $520 per
windshield. The Windshield division incurs total fixed costs of $3,750,000 per year.
If the Windshield division has excess capacity, what is the range of possible transfer prices that could be used on transfers between
the Windshield and Assembly divisions?
Transfer price per windshield will be at least
but not more than
Drav
Chapter 11 Solutions
MANAGERIAL ACCOUNTING (ACCESS) >C<
Ch. 11 - Prob. 1QCh. 11 - Prob. 2QCh. 11 - Prob. 3QCh. 11 - Prob. 4QCh. 11 - Prob. 5QCh. 11 - Prob. 6QCh. 11 - Prob. 7QCh. 11 - Prob. 8QCh. 11 - Prob. 9QCh. 11 - Prob. 10Q
Ch. 11 - Prob. 1AECh. 11 - Prob. 2AECh. 11 - Prob. 1F15Ch. 11 - Prob. 2F15Ch. 11 - Prob. 3F15Ch. 11 - Prob. 4F15Ch. 11 - Prob. 5F15Ch. 11 - Prob. 6F15Ch. 11 - Prob. 7F15Ch. 11 - Prob. 8F15Ch. 11 - Prob. 9F15Ch. 11 - Prob. 10F15Ch. 11 - Prob. 11F15Ch. 11 - (
$1,000,000
300,000
700,000
500.000
$
200,000
...Ch. 11 - Prob. 13F15Ch. 11 - Prob. 14F15Ch. 11 - Prob. 15F15Ch. 11 - Prob. 1ECh. 11 - Prob. 2ECh. 11 - Prob. 3ECh. 11 - Prob. 4ECh. 11 - Prob. 5ECh. 11 - Prob. 6ECh. 11 - Prob. 7ECh. 11 - Prob. 8ECh. 11 -
EXERCISE 11-9 Return on Investment (ROI) and...Ch. 11 - Prob. 10ECh. 11 - Prob. 11ECh. 11 - Prob. 12ECh. 11 - Prob. 13ECh. 11 - Prob. 14ECh. 11 - Prob. 15ECh. 11 - Prob. 16ECh. 11 - Prob. 17PCh. 11 - Prob. 18PCh. 11 - Prob. 19PCh. 11 - Prob. 20PCh. 11 - Prob. 21PCh. 11 - Prob. 22PCh. 11 - Prob. 23PCh. 11 - Prob. 24PCh. 11 - Prob. 25PCh. 11 - Prob. 26C
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- 11:51 dent question Show Transcribed Text Week 4 Assignment Transfer Data The Better Chair Company manufactures high-end chairs in alpha division in a country with a 35% income tax rate and transfers these chairs to beta division in a country with a 40% income tax. An import duty of 10% of the transfer price is paid on all imported products. The import duty is not deductible in computing taxable income. The fixed cost for a high-end chair is $300 and the variable cost is $650, which brings the full cost (i.e., total cost) for each chair to $950. They are sold by beta division for $1050. The tax authorities in both countries allow firms to use either variable cost or full cost as the transfer price. Alpha Division Taxes: Transfer Price Less (subtract) Cost Taxable Income Taxes (or refund) Beta Division Taxes: Sales Price Less (subtract) Transfer Price Taxable Income Income Taxes Import Duty Taxes (or refund) Total Taxes Show Transcribed Text = رام Full Cost 0 0 4G 100.00 vop KB/S LTE 4…arrow_forwardWeek 8Spark Ltd has two divisions, assembly and electrical. The assembly division transfers partiallycompleted components to the electrical division at a predetermined transfer price. The assemblydivision’s standard variable production cost per unit is $550. This division has spare capacity, and itcould sell all its components to outside buyers at $680 per unit in a perfectly competitive market.Required:-What transfer price would you recommend if there was no outside market for the transferred component and the assembly division had spare capacity? - Explain how negotiation between the supplying and buying units may be used to set transferprices. How does this relate to the general transfer pricing rule?arrow_forwardExercise 11-13 (Algo) Transfer Pricing Situations [LO11-3] Skip to question [The following information applies to the questions displayed below.] In each of the cases below, assume Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits. Case A B Division X: Capacity in units 100,000 95,000 Number of units being sold to outside customers 100,000 74,000 Selling price per unit to outside customers $ 55 $ 30 Variable costs per unit $ 26 $ 14 Fixed costs per unit (based on capacity) $ 7 $ 5 Division Y: Number of units needed for production 21,000 21,000 Purchase price per unit now being paid to an outside supplier $ 50 $ 28 Exercise 11-13 (Algo) Part 1 Required: 1. Refer to the data in case A above. Assume in this case that $3 per unit in variable selling costs can be avoided on…arrow_forward
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