Question 1

First Fleet Company is a two-division firm and has the following information available for this year:
 What is Division B's division segment margin?

Accepted Answer

A)  $280,000 
B)  $180,000 
C)  $220,000 
D)  $520,000

Question 2

The Leg Division of Creative Chair Company sells all of its output to the Chair Division of the company. The only product of the Leg Division is chair legs that the Chair Division uses in making chairs. The retail price of the legs is $12 per leg. Each chair completed by the Chair Division requires 4 legs. Production quantity and cost data for the period are as follows:
  Required:
Determine the transfer price for a chair leg using:
a. Market price
b. Variable product costs plus 40 percent
c. Absorption costs plus 14 percent
d. Variable costs
e. Total costs plus 9 percent

Accepted Answer

The answer of The Leg Division of Creative Chair Company...

Question 3

In a segment report, the profit number immediately after subtracting segment direct fixed costs is called the segment contribution margin.

Accepted Answer

A) True 
 B)False

Question 4

A segment report can be prepared:

Accepted Answer

A)  Only for reporting units of an organization 
B)  Only for divisions of an organization 
C)  For any part of the business for which management believes the information would be useful 
D)  Only for strategic business segments of an organization

Question 5

Which of the following transfer pricing methods is least likely to favor the seller?

Accepted Answer

A)  Allowing the buyer and seller to negotiate the price 
B)  Variable costs plus 5 percent 
C)  Absorption cost plus 5 percent 
D)  Market prices

Question 6

Glen Manufacturing Company has two divisions: A and B. Division A prepares the steel for processing. Division B processes the steel into the final product. No inventories exist in either division at the beginning or end of the year. During the year, Division A prepared 25,000 lbs. of steel at a cost of $500,000. All the steel was transferred to Division B where additional operating costs of $10 per lb. were incurred. The final product was sold for $1,600,000.
Required:
a. Determine the gross profit for each division and for the company as a whole if the transfer price is $18 per lb.
b. Determine the gross profit for each division and for the company as a whole if the transfer price is $22 per lb.

Accepted Answer

The answer of Glen Manufacturing Company has two divisions: A...

Question 7

Brick City Company has the following information pertaining to its Stone Division for this year:
  Common expenses for the year are $24,000.
Calculate the Stone Division's contribution margin.

Accepted Answer

The answer of Brick City Company has the following information...

Question 8

A balanced scorecard is:

Accepted Answer

A)  An evaluation process that focuses on productivity 
B)  A performance measurement system that is strictly directed toward sales growth 
C)  A performance measure that evaluates multiple categories related to organizational goals 
D)  A series of checks and balances designed to be mutually cooperative with the financial statements

Question 9

Madeline Company has two divisions: North and South. For 2017, North had revenues of $200,000 and South had $600,000. In the North Division, fixed expenses were $30,000 and variable expenses were $40,000. In the South Division, fixed expenses were $140,000 and variable expenses were $75,000. Common expenses were $45,000.
Prepare income statements for each division and the company in a format appropriate for segment reporting.

Accepted Answer

The answer of Madeline Company has two divisions: North and...

Question 10

Beverage Depot's Juice Division, has two product lines (Orange and Apple) and has the following information available for the current year:
 The Product Margin for Orange is:

Accepted Answer

A)  $335,000 
B)  $310,000 
C)  $260,000 
D)  $185,000

Question 11

Landscape Manufacturing Company has three divisions. Engine components are transferred from Components to Assembly. Assembled engines are transferred from Assembly to the Mower Division. Costs for each division are given below. Mowers are sold on in a competitive outside market for $250.
  All transfers are made at 100% of absorption cost. This period, Components sends Assembly 10,000 packages of engine components.
Determine the transfer price Assembly pays Components for engine components.

Accepted Answer

The answer of Landscape Manufacturing Company has three divisions. Engine...

Question 12

The following information pertains to the Oklahoma Sooners Division, which operates as an investment center:
  Calculate the Oklahoma Sooners Division's net assets.

Accepted Answer

The answer of The following information pertains to the Oklahoma...

Question 13

Joliet Division has the capacity to make 1,500 units of an intermediate good that is sold both internally and on the open market for a price of $32 each. To make the product, Joliet incurs $7 of variable cost per unit and $12 of fixed costs per unit.
What is the minimum price Joliet would accept for an internal transfer of 1,000 units of the product if the division is operating at 100% capacity?

Accepted Answer

A)  $ 7.00 each 
B)  $19.00 each 
C)  $32.00 each 
D)  $30.00 each

Question 14

The Chip Division of Computer Co. has just revised its actual cost data for the year just ended. Chip Division transfers circuit boards to the Assembly Division, and incurs no selling expense for such transfers. Assembly Division can buy the same goods in the open market for $71 each. Chip's new cost data are:
  Current production is 400,000 units, and Chip has a capacity of 600,000 units.
Required:
a. What is the lowest price Chip should charge for the internal transfer of its goods?
b. What is the highest price Assembly should pay Chip for the units?
c. Give the primary reason why Chip should reduce its price for internal transfers below the market price.

Accepted Answer

The answer of The Chip Division of Computer Co. has...

Question 15

Naperville Company has two divisions: the Mixing Division and Bottling Division. The Mixing Division sells beverage mix to the Bottling Division. Standard costs for the Mixing Division are as follows:
 The Mixing Division uses the following predetermined overhead rate:
 What is the transfer price for the beverage mix per gallon based on standard absorption cost plus a markup of 30 percent?

Accepted Answer

A)  $ 5.35 
B)  $ 6.24 
C)  $ 8.70 
D)  $ 4.75

Question 16

Illinois Mower Manufacturing Company has three divisions. Engine components are transferred from Components to Assembly. Assembled engines are transferred from Assembly to the Mower Division. Costs for each division are given below. Mowers are sold on a competitive outside market for $125. There are no outside markets for engine components or assembled engines.
 This period, Components sends Assembly 5,000 packages of engine components.
Using a market based transfer price, determine the amount Assembly would pay Components:

Accepted Answer

A)  Cannot be determined from the information provided 
B)  Is based on the Component's division's variable cost 
C)  Is based on the Component's division's full absorption cost 
D)  Is the $125 market price of the mowers

Exam 11: Segment Reporting, Transfer Pricing, and Balanced Scorecard

First Fleet Company is a two-division firm and has the following information available for this year: What is Division B's division segment margin?

In a segment report, the profit number immediately after subtracting segment direct fixed costs is called the segment contribution margin.

A segment report can be prepared:

Which of the following transfer pricing methods is least likely to favor the seller?

Brick City Company has the following information pertaining to its Stone Division for this year: Common expenses for the year are $24,000. Calculate the Stone Division's contribution margin.

A balanced scorecard is:

Beverage Depot's Juice Division, has two product lines (Orange and Apple) and has the following information available for the current year: The Product Margin for Orange is:

The following information pertains to the Oklahoma Sooners Division, which operates as an investment center: Calculate the Oklahoma Sooners Division's net assets.