Question :
Answer the following questions using the information below:
Branded Shoe Company : 1211998
Answer the following questions using the information below:
Branded Shoe Company manufactures only one type of shoe and has two divisions, the Stitching Division and the Polishing Division. The Stitching Division manufactures shoes for the Polishing Division, which completes the shoe and sells it to retailers. The Stitching Division “sells”shoes to the Polishing Division. The market price for the Polishing Division to purchase a pair of shoes is $42. (Ignore changes in inventory.) The fixed costs for the Stitching Division are assumed to be the same over the range of 40,000-100,000 units. The fixed costs for the Polishing Division are assumed to be $14 per pair at 100,000 units.
Stitching’s costs per pair of soles are:
Direct materials$10
Direct labor$ 8
Variable overhead$ 6
Division fixed costs$ 4
Polishing’s costs per completed pair of shoes are:
Direct materials$14
Direct labor$ 6
Variable overhead$ 4
Division fixed costs$16
11) What is the market-based transfer price per pair of shoes from the Stitching Division to the Polishing Division?
A) $20
B) $32
C) $42
D) $52
12) What is the transfer price per pair of shoes from the Stitching Division to the Polishing Division if the method used to place a value on each pair of shoes is 180% of variable costs?
A) $18.00
B) $32.40
C) $43.20
D) $57.60
13) What is the transfer price per pair of shoes from the Stitching Division to the Polishing Division if the transfer price per pair of soles is 125% of full costs?
A) $12.50
B) $22.50
C) $30.00
D) $35.00
14) Calculate and compare the difference in overall corporate net income of Branded Shoe Company 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) The net income would be the same under both scenarios.
15) Assume the transfer price for a pair of shoes is 180% of total costs of the Stitching Division and 40,000 of soles are produced and transferred to the Polishing Division. The Stitching Division’s operating income is ________.
A) $896,000
B) $720,000
C) $800,000
D) $880,000
16) If the Polishing 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:
Plish Company manufactures only one type of washing machine and has two divisions, the Compressor Division, and the Fabrication Division. The Compressor Division manufactures compressors for the Fabrication Division, which completes the washing machine and sells it to retailers. The Compressor Division “sells” compressors to the Fabrication Division. The market price for the Fabrication Division to purchase a compressor is $40.00. (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 Fabrication Division are assumed to be $7.50 per unit at 10,000 units.
Compressor’s costs per compressor are:
Direct materials$15.00
Direct labor$7.25
Variable overhead$3.00
Division fixed costs$7.50
Fabrication’s costs per completed air conditioner are:
Direct materials$150.00
Direct labor$62.50
Variable overhead$20.00
Division fixed costs$7.50
17) What is the market-based transfer price per compressor from the Compressor Division to the Fabrication Division?
A) $17.00
B) $27.25
C) $34.75
D) $40.00
18) What is the transfer price per compressor from the Compressor Division to the Fabrication Division if the method used to place a value on each compressor is 150% of variable costs?
A) $22.50
B) $37.88
C) $45.00
D) $50.50
19) What is the transfer price per compressor from the Compressor Division to the Fabrication Division if the transfer price per compressor is 110% of full costs?
A) $16.50
B) $24.50
C) $28.18
D) $36.03
20) Assume the transfer price for a compressor is 150% of total costs of the Compressor Division and 1,000 of the compressors are produced and transferred to the Fabrication Division. The Compressor Division’s operating income is ________.
A) $15,875
B) $16,375
C) $17,375
D) $18,250
