Essay
Materials used by Ford Company in producing Division A's product are currently purchased from outside suppliers at a cost of $30 per unit.However, the same materials are available from Division B.Division B has unused capacity and can produce the materials needed by Division A at a variable cost of $20 per unit.
(a)If a transfer price of $25 per unit is established and 60,000 units of material are transferred with no reductions in Division B's current sales, how much would Ford Company's total operating income increase?
(b)How much would the operating income of Division A increase?
(c)How much would the operating income of Division B increase?
(d)If the negotiated price approach is used, what would be the range of acceptable transfer prices?
Correct Answer:
Verified
(a)$600,000; [60,000 × ($30 - $25)] + [6...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
Q63: The best measure of managerial efficiency in
Q64: Materials used by Boone Company in producing
Q65: Identify the type of organization in which
Q66: Personnel administration expense for a department in
Q67: Identify the formula used to calculate profit
Q69: Materials used by Boone Company in producing
Q70: Depreciation expense on store equipment for a
Q71: Division M for Movism Company has a
Q73: Identify the formula for the rate of
Q180: The process of measuring and reporting operating