Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
14th Edition
ISBN: 9781337541398
Author: Carl Warren; James M. Reeve; Jonathan Duchac
Publisher: Cengage Learning
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Question
Chapter 9, Problem 6PB
(1)
To determine
Transfer price: The price charged for the goods and services transferred among the divisions is referred to as transfer price.
Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.
To indicate: If the market price be the appropriate transfer price for Company E.
(2)
To determine
The increase in S Division, NS Division, and Company E income from operations as a result of transfer pricing
(3)
To determine
To prepare: The income statements for S and NS Divisions of Company E for the year ended December 31, 20Y8
(4)
To determine
The increase in S Division, NS Division, and Company E income from operations as a result of transfer pricing
(5) a
To determine
The range of transfer price, if negotiated price approach is used
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Transfer Pricing
Exoplex Industries Inc. is a diversified aerospace company, including two operating divisions, Semiconductors and Navigational Systems. Condensed divisional income statements, which involve no intracompany transfers and include a breakdown of expenses into variable and fixed components, are as follows:
Exoplex Industries Inc.Divisional Income StatementsFor the Year Ended December 31, 20Y8
SemiconductorsDivision
NavigationalSystemsDivision
Total
Sales:
2,240 units × $396 per unit
$887,040
$887,040
3,675 units × $590 per unit
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2,168,250
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$887,040
$2,168,250
$3,055,290
Expenses:
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2,240 units × $232 per unit
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$519,680
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$1,734,600
1,734,600
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220,000
325,000
545,000
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Garcon Inc. manufactures electronic products, with two operating divisions, Consumer and Commercial. Condensed divisional income statements, which involve no intracompany transfers and which include a breakdown of expenses into variable and fixed components, are as follows:
(refer to pic)
2.
If the Commercial Division purchases 2,880 units from the Consumer Division, rather than externally, at a negotiated transfer price of $115 per unit, how much would the income from operations of each division and the total company income from operations increase?
3.
Prepare condensed divisional income statements for Garcon Inc. based on the data in Requirement 2.
4.
If a transfer price of $126 per unit is negotiated, how much would the income from operations of each division and the total company income from operations increase?
Exoplex Industries Inc. is a diversified aerospace company, including two operating divisions, Semiconductors and Navigational Systems. Condensed divisional income statements, which involve no intracompany transfers and include a breakdown of expenses into variable and fixed components, are as follows:
Exoplex Industries Inc.Divisional Income StatementsFor the Year Ended December 31, 20Y8
SemiconductorsDivision
NavigationalSystemsDivision
Total
Sales:
2,240 units × $396 per unit
$887,040
$887,040
3,675 units × $590 per unit
$2,168,250
2,168,250
Total sales
$887,040
$2,168,250
$3,055,290
Expenses:
Variable:
2,240 units × $232 per unit
$(519,680)
$(519,680)
3,675 units × $472* per unit
$(1,734,600)
(1,734,600)
Fixed
(220,000)
(325,000)
(545,000)
Total expenses
$(739,680)
$(2,059,600)
$(2,799,280)
Operating income
$147,360
$108,650…
Chapter 9 Solutions
Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
Ch. 9 - Differentiate between centralized and...Ch. 9 - Differentiate between a profit center and an...Ch. 9 - Prob. 3DQCh. 9 - What is the major shortcoming of using operating...Ch. 9 - In a decentralized company in which the divisions...Ch. 9 - How does using the return on investment facilitate...Ch. 9 - Prob. 7DQCh. 9 - Prob. 8DQCh. 9 - Prob. 9DQCh. 9 - When using the negotiated price approach to...
Ch. 9 - Budgetary performance for cost center Vinton...Ch. 9 - Support department allocations The centralized...Ch. 9 - Prob. 3BECh. 9 - Profit margin, investment turnover, and ROI Briggs...Ch. 9 - Residual income The Commercial Division of Galena...Ch. 9 - Prob. 6BECh. 9 - Prob. 1ECh. 9 - Prob. 2ECh. 9 - For each of the following support departments,...Ch. 9 - Prob. 4ECh. 9 - Service department charges In divisional income...Ch. 9 - Service department charges and activity bases...Ch. 9 - Prob. 7ECh. 9 - Prob. 8ECh. 9 - Prob. 9ECh. 9 - Prob. 10ECh. 9 - Prob. 11ECh. 9 - Prob. 12ECh. 9 - Prob. 13ECh. 9 - Prob. 14ECh. 9 - Prob. 15ECh. 9 - Prob. 16ECh. 9 - Prob. 17ECh. 9 - Prob. 18ECh. 9 - Prob. 19ECh. 9 - Prob. 20ECh. 9 - Prob. 1PACh. 9 - Profit center responsibility reporting for a...Ch. 9 - Prob. 3PACh. 9 - Effect of proposals on divisional performance A...Ch. 9 - Divisional performance analysis and evaluation The...Ch. 9 - Prob. 6PACh. 9 - Prob. 1PBCh. 9 - Prob. 2PBCh. 9 - Prob. 3PBCh. 9 - Prob. 4PBCh. 9 - Prob. 5PBCh. 9 - Prob. 6PBCh. 9 - Prob. 1ADMCh. 9 - Prob. 2ADMCh. 9 - Prob. 3ADMCh. 9 - Prob. 1TIFCh. 9 - Prob. 2TIFCh. 9 - Communication The Norse Division of Gridiron...
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