Essay
Avery Company has two divisions,Polk and Bishop.Polk produces an item that Bishop could use in its production.Bishop currently is purchasing 25,000 units from an outside supplier for $24 per unit.Polk is currently operating at less than its full capacity of 600,000 units and has variable costs of $12 per unit.The full cost to manufacture the unit is $18.Polk currently sells 450,000 units at a selling price of $25.50 per unit.
a.What will be the effect on Avery Company's operating profit if the transfer is made internally?
b.What is the minimum transfer price from Polk's perspective?
c.What is the maximum transfer price from Bishop's perspective?
Correct Answer:
Verified
a.$300,000 more profit = 25,000 × ($24 -...View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Correct Answer:
Verified
View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Q94: Palm Inc.has a profit margin of 15%
Q95: Almond,Inc.uses a balanced scorecard.One of the measures
Q96: Holiday Corp.has two divisions,Quail and Marlin.Quail produces
Q97: Tiffany Company has two divisions,Gold and Silver.Gold
Q98: Which of the following is the primary
Q100: The balanced scorecard attempts to focus managers'
Q101: Concord Company has two divisions,Rice and Pine.Rice
Q102: Segment margin and profit margin are identical
Q103: Which of the following is not a
Q104: A _ is the amount that one