Decision on Transfer Pricing Materials used by the Instrument Division of T_Kong Industries are currently purchased from outside suppliers at a cost of $262 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $217 per unit. a. If a transfer price of $238 per unit is established and 46,700 units of materials are transferred, with no reduction in the Components Division's current sales, how much would T_Kong Industries' total income from operations increase? b. How much would the Instrument Division's income from operations increase? c. How much would the Components Division's income from operations increase? X

Decision on Transfer Pricing Materials used by the Instrument Division of T_Kong Industries are currently purchased from outside suppliers at a cost of $262 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $217 per unit. a. If a transfer price of $238 per unit is established and 46,700 units of materials are transferred, with no reduction in the Components Division's current sales, how much would T_Kong Industries' total income from operations increase? b. How much would the Instrument Division's income from operations increase? c. How much would the Components Division's income from operations increase? X

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 17E: Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside...

See similar textbooks

Similar questions

Morrill Company produces two different types of gauges: a density gauge and a thickness gauge. The segmented income statement for a typical quarter follows. Includes depreciation. The density gauge uses a subassembly that is purchased from an external supplier for 25 per unit. Each quarter, 2,000 subassemblies are purchased. All units produced are sold, and there are no ending inventories of subassemblies. Morrill is considering making the subassembly rather than buying it. Unit-level variable manufacturing costs are as follows: No significant non-unit-level costs are incurred. Morrill is considering two alternatives to supply the productive capacity for the subassembly. 1. Lease the needed space and equipment at a cost of 27,000 per quarter for the space and 10,000 per quarter for a supervisor. There are no other fixed expenses. 2. Drop the thickness gauge. The equipment could be adapted with virtually no cost and the existing space utilized to produce the subassembly. The direct fixed expenses, including supervision, would be 38,000, 8,000 of which is depreciation on equipment. If the thickness gauge is dropped, sales of the density gauge will not be affected. Required: 1. Should Morrill Company make or buy the subassembly? If it makes the subassembly, which alternative should be chosen? Explain and provide supporting computations. 2. Suppose that dropping the thickness gauge will decrease sales of the density gauge by 10 percent. What effect does this have on the decision? 3. Assume that dropping the thickness gauge decreases sales of the density gauge by 10 percent and that 2,800 subassemblies are required per quarter. As before, assume that there are no ending inventories of subassemblies and that all units produced are sold. Assume also that the per-unit sales price and variable costs are the same as in Requirement 1. Include the leasing alternative in your consideration. Now, what is the correct decision?
Decision on Transfer Pricing Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $1,350 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $900 per unit. Assume that a transfer price of $1,200 has been established and that 75,000 units of materials are transferred, with no reduction in the Components Division's current sales. a. How much would Ziegler Inc.'s total operating income increase?$fill in the blank 1 b. How much would the Instrument Division's operating income increase?$fill in the blank 2 c. How much would the Components Division's operating income increase?$fill in the blank 3 d. Any transfer price will cause the total income of the company to , as long as the supplier division capacity is toward making materials for products that are…
Decision on transfer pricing Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $316 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $262 per unit. a. If a transfer price of $288 per unit is established and 27,900 units of materials are transferred, with no reduction in the Components Division's current sales, how much would Ziegler Inc.'s total operating income increase? b. How much would the Instrument Division's operating income increase? $ C. How much would the Components Division's operating income increase?
Decision on transfer pricing Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $447 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $371 per unit. Assume that a transfer price of $425 has been established and that 26,500 units of materials are transferred, with no reduction in the Components Division's current sales. a. How much would Ziegler Inc.'s total operating income increase? b. How much would the Instrument Division's operating income increase? C. How much would the Components Division's operating income increase? d. Any transfer price will cause the total income of the company to as long as the supplier division capacity is toward making materials for products that are ultimately sold to the outside.
Decision on transfer pricing Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $389 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $323 per unit. a. If a transfer price of $354 per unit is established and 35,600 units of materials are transferred, with no reduction in the Components Division's current sales, how much would Ziegler Inc.'s total operating income increase? X $ b. How much would the Instrument Division's operating income increase? $ C. $ How much would the Components Division's operating income increase?
Decision on Transfer Pricing Materials used by the Instrument Division of T_Kong Industries are currently purchased from outside suppliers at a cost of $316 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $262 per unit. a. If a transfer price of $288 per unit is established and 42,400 units of materials are transferred, with no reduction in the Components Division’s current sales, how much would T_Kong Industries’ total income from operations increase? b. How much would the Instrument Division’s income from operations increase? c. How much would the Components Division’s income from operations increase?
Decision on Transfer Pricing Materials used by the Instrument Division of XPort Industries are currently purchased from outside suppliers at a cost of $193 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $160 per unit. a. If a transfer price of $176 per unit is established and 27,900 units of materials are transferred, with no reduction in the Components Division's current sales, how much would XPort Industries’ total income from operations increase?$fill in the blank 1 b. How much would the Instrument Division’s income from operations increase?$fill in the blank 2 c. How much would the Components Division's income from operations increase?$fill in the blank 3
Decision on transfer pricing Materials used by the Instrument Division of XPort Industries are currently purchased from outside suppliers at a cost of $249 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $207 per unit. Assume that a transfer price of $237 has been established and that 25,200 units of materials are transferred, with no reduction in the Components Division’s current sales. a. How much would XPort Industries’ total income from operations increase?$fill in the blank 1 b. How much would the Instrument Division’s income from operations increase?$fill in the blank 2 c. How much would the Components Division’s income from operations increase?$fill in the blank 3 d. Any transfer price will cause the total income of the company to increase , as long as the supplier division capacity is used toward making…
Decision on transfer pricing Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $359 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $298 per unit. Assume that a transfer price of $341 has been established and that 34,200 units of materials are transferred, with no reduction in the Components Division's current sales. a. How much would Ziegler Inc.'s total operating income increase? b. How much would the Instrument Division's operating income increase? c. How much would the Components Division's operating income increase?
Decision on transfer pricing Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $299 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $248 per unit. Assume that a transfer price of $284 has been established and that 40,000 units of materials are transferred, with no reduction in the Components Division's current sales. a. How much would Ziegler Inc.'s total operating income increase? b. How much would the Instrument Division's operating income increase? c. How much would the Components Division's operating income increase? d. Any transfer price will cause the total income of the company to making materials for products that are ultimately sold to the outside. as long as the supplier division capacity is toward
Decision on Transfer Pricing Materials used by the Instrument Division of XPort Industries are currently purchased from outside suppliers at a cost of $368 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $305 per unit. a. If a transfer price of $335 per unit is established and 41,300 units of materials are transferred, with no reduction in the Components Division's current sales, how much would XPort Industries’ total income from operations increase? b. How much would the Instrument Division’s income from operations increase?$ c. How much would the Components Division's income from operations increase?
Materials used by the Instrument Division of T_Kong Industries are currently purchased from outside suppliers at a cost of $290 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $241 per unit. a. If a transfer price of $264 per unit is established and 39,200 units of materials are transferred, with no reduction in the Components Division’s current sales, how much would T_Kong Industries’ total income from operations increase?$ b. How much would the Instrument Division’s income from operations increase?$ c. How much would the Components Division’s income from operations increase?$