Question :
136.Division X makes a part that it sells to customers : 1258702
136.Division X makes a part that it sells to customers outside of the company. Data concerning this part appear below:
Selling price to outside customers$50
Variable cost per unit$30
Total fixed costs$400,000
Capacity in units$25,000
Division Y of the same company would like to use the part manufactured by Division X in one of its products. Division Y currently purchases a similar part made by an outside company for $49 per unit and would substitute the part made by Division X. Division Y requires 5,000 units of the part each period. Division X has ample excess capacity to handle all of Division Y’s needs without any increase in fixed costs and without cutting into outside sales. According to the formula in the text, what is the lowest acceptable transfer price from the standpoint of the selling division?
A. $50
B. $49
C. $46
D. $30
E. $20
137.Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below:
Selling price to outside customers$40
Variable cost per unit$30
Total fixed costs$10,000
Capacity in units$20,000
Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $38 per unit and would substitute the part made by Division A. Division B requires 5,000 units of the part each period. Division A has ample capacity to produce the units for Division B without any increase in fixed costs and without cutting into sales to outside customers. If Division A sells to Division B rather than to outside customers, the variable cost be unit would be $1 lower. What should be the lowest acceptable transfer price from the perspective of Division A? A. $40
B. $38
C. $30
D. $29
E. $10
138.The Mixed Nuts Division of Yummy Snacks, Inc. had the following operating results last year:
Sales (140,000 pounds of product)$70,000
Variable expenses42,000
Contribution margin$28,000
Fixed expenses12,000
Income$16,000
Yummy expects identical operating results in the division this year. The Mixed Nuts Division has the ability to produce and sell 200,000 pounds of product annually. Assume that the Trail Mix Division of Yummy wants to purchase an additional 20,000 pounds of nuts from the Mixed Nuts Division. Mixed Nuts will be able to increase its profit by accepting any transfer price above:
A. $0.25 per pound
B. $0.08 per pound
C. $0.15 per pound
D. $0.30 per pound
E. $0.10 per pound
139.The Dark Chocolate Division of Yummy Snacks, Inc. had the following operating results last year:
Sales (150,000 pounds of chocolate)$60,000
Variable expenses 37,500
Contribution margin22,500
Fixed expenses 12,000
Profit $10,500
Dark Chocolate expects identical operating results this year. The Dark Chocolate Division has the ability to produce and sell 200,000 pounds of chocolate annually. Assume that the Peanut Butter Division of Yummy Snacks wants to purchase an additional 20,000 pounds of chocolate from the Dark Chocolate Division. Assume that the Dark Chocolate Division is currently operating at its capacity of 200,000 pounds of chocolate. Also assume again that the Peanut Butter Division wants to purchase an additional 20,000 pounds of chocolate from Dark Chocolate. Under these conditions, what amount per pound of chocolate would Dark Chocolate have to charge Peanut Butter in order toA. $0.40 per pound
B. $0.08 per pound
C. $0.15 per pound
D. $0.25 per pound
E. $0.30 per pound
140.Division X makes a part with the following characteristics:
Production capacity25,000 units
Selling price to outside customers$18
Variable cost per unit$11
Fixed cost, total$100,000
Division Y of the same company would like to purchase 10,000 units each period from Division X. Division Y now purchases the part from an outside supplier at a price of $17 each. Suppose Division X has ample excess capacity to handle all of Division Y’s needs without any increase in fixed costs and without cutting into sales to outside customers. If Division X refuses to accept the $17 price internally and Division Y continues to buy from the outside supplier, the company as a whole will be:
A. worse off by $70,000 each period.
B. better off by $10,000 each period.
C. worse off by $60,000 each period.
D. worse off by $20,000 each period.
E. better off by $60,000 each period.
141.Division A produces a part with the following characteristics:
Capacity in units50,000
Selling price per unit$30
Variable cost per unit$18
Fixed cost per unit$3
Division B, another division in the company, would like to buy this part from Division A. Division B is presently purchasing the part from an outside source at $28 per unit. If Division A sells to Division B, $1 in variable costs can be avoided. Suppose Division A is currently operating at capacity and can sell all of the units it produces on the outside market for its usual selling price. From the point of view of Division A, any sales to Division B should be priced no lower than:
A. $27
B. $29
C. $20
D. $28
E. $21
