Question :
Answer the following questions using the information below:
Greenlawn Corporation has : 1217128
Answer the following questions using the information below:
Greenlawn Corporation has two divisions, Distribution and Production. The company’s primary product is fertilizer. Each division’s costs are provided below:
Production:Variable costs per pound$0.10
Fixed costs per pound$0.50
Distribution:Variable costs per pound$0.06
Fixed costs per pound$0.04
The Distribution Division has been operating at a capacity of 4,000,000 pounds a week and usually purchases 2,000,000 pounds from the Production Division and 2,000,000 pounds from other suppliers at $0.90 per pound.
9) What is the transfer price per barrel from the Production Division to the Distribution Division, assuming the method used to place a value on each pound of fertilizer is 160% of variable costs?
A) $0.10
B) $0.22
C) $0.16
D) $0.80
10) What is the transfer price per barrel from the Production Division to the Distribution Division, assuming the method used to place a value on each pound of fertilizer is 120% of full costs?
A) $0.60
B) $0.72
C) $0.90
D) $1.10
11) Assume 100,000 pounds are transferred from the Production Division to the Distribution Division for a transfer price of $0.80 per pound. The Distribution Division sells the 100,000 pounds at a price of $1.10 each to customers. What is the operating income of both divisions together?
A) $20,000
B) $30,000
C) $40,000
D) $50,000
Answer the following questions using the information below:
Calculate the Division operating income for the AlphaShoe Company which manufactures only one type of shoe and has two divisions, the Sole Division, and the Assembly Division. The Sole Division manufactures soles for the Assembly Division, which completes the shoe and sells it to retailers. The Sole Division “sells” soles to the Assembly Division. The market price for the Assembly Division to purchase a pair of soles is $40. (Ignore changes in inventory.) The fixed costs for the Sole Division are assumed to be the same over the range of 40,000-100,000 units. The fixed costs for the Assembly Division are assumed to be $14 per pair at 100,000 units.
Sole’s costs per pair of soles are:
Direct materials$8
Direct labor$6
Variable overhead$4
Division fixed costs$2
Assembly’s costs per completed pair of shoes are:
Direct materials$12
Direct labor$4
Variable overhead$2
Division fixed costs$14
12) What is the market-based transfer price per pair of soles from the Sole Division to the Assembly Division?
A) $20
B) $32
C) $40
D) $52
13) What is the transfer price per pair of soles from the Sole Division to the Assembly Division if the method used to place a value on each pair of soles is 180% of variable costs?
A) $28.80
B) $25.20
C) $32.40
D) $57.60
14) What is the transfer price per pair of shoes from the Sole Division to the Assembly Division per pair of soles if the transfer price per pair of soles is 125% of full costs?
A) $20
B) $25
C) $26
D) $30
15) Calculate and compare the difference in overall corporate net income between Scenario A and Scenario B if the Assembly Division sells 100,000 pairs of shoes for $120 per pair to customers.
Scenario A: Negotiated transfer price of $30 per pair of soles
Scenario B: Market-based transfer price
A) $1,000,000 more net income under Scenario A
B) $1,000,000 of net income using Scenario B
C) $200,000 of net income using Scenario A.
D) None of these answers is correct.
16) Assume the transfer price for a pair of soles is 180% of total costs of the Sole Division and 40,000 of soles are produced and transferred to the Assembly Division. The Sole Division’s operating income is:
A) $640,000
B) $720,000
C) $800,000
D) $880,000
17) If the Assembly Division sells 100,000 pairs of shoes at a price of $120 a pair to customers, what is the operating income of both divisions together?
A) $8,800,000
B) $6,800,000
C) $6,000,000
D) $5,200,000
Answer the following questions using the information below:
Calculate the Division operating income for the Artic Air Company which manufactures only one type of air conditioner and has two divisions, the Compressor Division, and the Assembly Division. The Compressor Division manufactures compressors for the Assembly Division, which completes the air conditioner and sells it to retailers. The Compressor Division “sells” compressors to the Assembly Division. The market price for the Assembly Division to purchase a compressor is $38.50. (Ignore changes in inventory.) The fixed costs for the Compressor Division are assumed to be the same over the range of 5,000-10,000 units. The fixed costs for the Assembly Division are assumed to be $7.50 per unit at 10,000 units.
Compressor’s costs per compressor are:
Direct materials$17.00
Direct labor$7.25
Variable overhead$3.00
Division fixed costs$7.50
Assembly’s costs per completed air conditioner are:
Direct materials$150.00
Direct labor$62.50
Variable overhead$20.00
Division fixed costs$7.50
18) What is the market-based transfer price per compressor from the Compressor Division to the Assembly Division?
A) $17.00
B) $27.25
C) $34.75
D) $38.50
