Bernie Manufacturing Company Has Two Divisions,X and Y

Essay

Bernie Manufacturing Company has two divisions,X and Y.Division X prepares the steel for processing.Division Y processes the steel into the final product.No inventories exist in either division at the beginning or end of the current year.During the year,Division X prepared 80,000 kgs.of steel at a cost of $800,000.All the steel was transferred to Division Y where additional operating costs of $5 per kg.were incurred.The final product was sold for $3,000,000.
a.Determine the gross profit for each division and for the company as a whole if the transfer price is $8 per kg.
b.Determine the gross profit for each division and for the company as a whole if the transfer price is $12 per kg.