Essay
Sugar Company has two divisions,Lenox and Berkshire.Lenox produces an item that Berkshire could use in its production.Berkshire currently is purchasing 100,000 units from an outside supplier for $43 per unit.Lenox is currently operating at full capacity of 750,000 units and has variable costs of $28 per unit.The full cost to manufacture the unit is $35.Lenox currently sells 750,000 units at a selling price of $44 per unit.
a.What will be the effect on Sugar Company's operating profit if the transfer is made internally?
b.What will be the change in profits for Lenox if the transfer price is $40 per unit?
c.What will be the change in profits for Berkshire if the transfer price is $40 per unit?
Correct Answer:
Verified
a.$100,000 less profits = 100,000 × ($43...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
Q116: Avocado Company has an operating income of
Q117: Estate has an ROI of 16% based
Q118: Sandy Company has two divisions,Huron and Cortez.Huron
Q119: Florida Inc.has revenues of $1,500,000 resulting in
Q120: Which of the following statements contrasting residual
Q121: Indigo Corp.has an ROI of 15% and
Q122: Pine Corp.has revenues of $500,000 resulting in
Q123: The responsibility center in which the manager
Q124: Tropic Corp.has sales revenue of $500,000 resulting
Q125: The balanced scorecard includes both leading and