EBK HORNGREN'S COST ACCOUNTING
EBK HORNGREN'S COST ACCOUNTING
16th Edition
ISBN: 9780134475998
Author: Rajan
Publisher: YUZU
Question
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Chapter 22, Problem 22.34P

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

Goal Congruency:

The goal congruency means that the sub-units and the main unit of an organization follow similar goals so that the objectives are attained.

To determine: The additional level of promotional expense chosen by the H division manager.

B.

To determine

The level of additional promotional expense that as a manager would you like that the division manager should select.

C.

To determine

The level of spending which the President would like to be selected by the division manager.

D.

To determine

The maximum transfer price that would induce the H division to spend the optimal additional promotional expense from the standpoint of whole firm.

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The Croydon division of CC Industries supplies the Hauser division with 100,000 units per month of an infrared LED that Hauser uses in a remote control device it sells. The transfer price of the LED is $8, which is the market price. However, Croydon does not operate at or near capacity. The variable cost to Croydon of the LED is $4.80, while Hauser incurs variable costs (excluding the transfer price) of $12 for each remote control. Hauser’s selling price is $32. Hauser’s manager is considering a promotional campaign. The market research department of Hauser has developed the following estimates of additional monthly volume associated with additional monthly promotional expenses. Additional Monthly Promotional Expenses: $80,000 $120,000 $160,000 Additional Monthly Volume (Units) 10,000 15,000 18,000 Q. As the manager of the Croydon division, what level of additional promotional expenses would you like to see the Hauser division manager select?
Holiday Corp. has two divisions, Quail and Marlin. Quail produces a widget that Marlun could use in its production. Quail's variable costs are $5.80 per widget while the full cost is $8.80. Widgets sell on the open market for $15.6 each. If Quail has excess capacity, what would be the minimum transfer price if Marlin is purchasing 190000 units on the open market?   a) $5.8 b) $8.8 c) $15.6 d) $6.8
The Croydon division of CC Industries supplies the Hauser division with 100,000 units per month of an infrared LED that Hauser uses in a remote control device it sells. The transfer price of the LED is $8, which is the market price. However, Croydon does not operate at or near capacity. The variable cost to Croydon of the LED is $4.80, while Hauser incurs variable costs (excluding the transfer price) of $12 for each remote control. Hauser’s selling price is $32. Hauser’s manager is considering a promotional campaign. The market research department of Hauser has developed the following estimates of additional monthly volume associated with additional monthly promotional expenses. Additional Monthly Promotional Expenses: $80,000 $120,000 $160,000 Additional Monthly Volume (Units) 10,000 15,000 18,000 Q. As the president of CC Industries, what level of spending would you like the Hauser division manager to select?

Chapter 22 Solutions

EBK HORNGREN'S COST ACCOUNTING

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