Concept explainers
1.
Introduction: Transfer prices means the price charged on the product or service provided by on department of the company to another department of the company. Divisions are evaluated on the profit basis, or residual income price must be fixed for the transfer. Prices charged in these situations are referred as transfer prices.
To compute: The variable cost of Transport Service Department that is charged to each plant.
1.
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Answer to Problem 11B.1E
The variable cost of Transport Service Department that is charged to northern plant $210,000 and southern plant is $32,500.
Explanation of Solution
Variable costs charged to Northern plant
Variable costs charged to Southern plant
2.
Introduction: Transfer prices means the price charged on the product or service provided by on department of the company to another department of the company. Divisions are evaluated on the profit basis, or residual income price must be fixed for the transfer. Prices charged in these situations are referred as transfer prices.
To compute: The fixed cost of Transport Service Department that is charged to each plant.
2.
![Check Mark](/static/check-mark.png)
Answer to Problem 11B.1E
The fixed cost of Transport Service Department that is charged to northern plant $210,000 and southern plant is $90,000.
Explanation of Solution
Fixed cost charged to Northern plant
Fixed cost charged to Southern plant
3.
Introduction: Transfer prices means the price charged on the product or service provided by on department of the company to another department of the company. Divisions are evaluated on the profit basis, or residual income price must be fixed for the transfer. Prices charged in these situations are referred as transfer prices.
To compute: The actual costs of $364,000 that can be treated as the Spending variances and are not charged to the plants.
3.
![Check Mark](/static/check-mark.png)
Answer to Problem 11B.1E
The overall spending variance of $19000 shows that the costs incurred in excess of the budget $0.25 per ton variable cost and budget $300,000 in fixed cost $19000 uncharged cost is the responsibility of the transport service department.
Explanation of Solution
Total variable costs charges by both the plants are $45,000 ($32,500 + $12,500) and fixed cost to both the plants are $300,000 ($210,000 + $90,000).
Total charges to both the plants are $345,000
The total actual cost incurred is $364,000
The remaining cost $19000 (
The overall spending variance of $19000 shows that the costs incurred in excess of the budget $0.25 per ton variable cost and budget $300,000 in fixed cost $19000 uncharged cost is the responsibility of the transport service department.
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Chapter 11B Solutions
MANAGERIAL ACCOUNTING(LL)-W/CONNECT >C<
- Company A produces a component used in the production of one of the company’s main products. The costs are budgeted as follows: Amount per unit (R) Amount per 5 000 units (R) Materials 5 25 000Labour 15 75 000Variable overhead 10 50 000Depreciation 4 20 000Allocated general overhead 12 60 000Total cost 46 230 000The components can be purchased from an outside supplier at a cost of R35 per unit. Required: Q.3.1 Determine whether the company should make or buy the component. In arriving at your solution clearly show all your workings, as marks will be allocated. Q.3.2 State five qualitative aspects that the company must evaluate before making a…arrow_forwardCompany A produces a component used in the production of one of the company’s main products.The costs are budgeted as follows:Amount per unit (R) Amount per 5 000 units (R)Materials 5 25 000Labour 15 75 000Variable overhead 10 50 000Depreciation 4 20 000Allocated general overhead 12 60 000Total cost 46 230 000The components can be purchased from an outside supplier at a cost of R35 per unit.Required:Q.3.2 State five qualitative aspects that the company must evaluate before making a decision in Q.3.1 above.Q.3.3 Briefly explain the difference between avoidable costs, differential costs and opportunity costs. Provide one example of each cost.Q.3.4 List two examples of scenarios where relevant costing can be used effectively in decision‐making.arrow_forwardKirchoff, Inc., manufactures a product with the following costs: Direct materials Per Unit Per Year P18.00 Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable SG&A expenses P11.90 P2.10 P1,422,000 P3.60 Fixed SG&A expenses The pricing calculations are based on budgeted production and sales P1,540,500arrow_forward
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- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
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