# Division-A makes a part that it sells to customers outside

Question # 00004923 Posted By: mac123 Updated on: 12/08/2013 04:19 AM Due on: 12/31/2013
Subject Finance Topic Finance Tutorials:
Question
. Division-A makes a part that it sells to customers outside

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9. Division-A makes a part that it sells to customers outside of the company. Data concerning this part appear below:

Selling price to outside customers ---------\$75
Variable cost per unit \$50
Total fixed costs -----\$400,000
Capacity in units------------------------------ 25,000

Division-B of the same company would like to use the part manufactured by Division-A in one of its products. Division-S currently purchases a similar part made by an outside company for \$70 per unit and would substitute the part made by Division-A. Division-B requires 5,000 units of the part each period. Division-A can already sell all of the units it can produce on the outside market. What should be the lowest acceptable transfer price from the perspective of Division-A?

5. The Wall-shire Company has three divisions-Northern, Western, and Southern. The divisions have the following

revenues and expenses:

Northernn Western Southern

Sales
Variable expenses
Traceable fixed expenses

\$450,000
225,000
165,000

\$410,000
140,000
105,000

680,000
242,000
218,000

Allocated common comorate expenses 92.000 85.000 135.000
Net operating income (loss) \$(32.000) \$80.000 \$85.000

Management of Kosco is considering the elimination of the Northern Division. If the Northern Division were eliminated, its traceable fixed expenses could be avoided. The total common corporate expenses would be unaffected. Given these data, what is your decision, eliminating or keeping it and why? Justify your decision, showing your calculation, and overall company's net operating income or loss, before and after eliminating Northern Division.

I. Water-Pacific Company sells a single product for \$39.50 per unit. If variable expenses are 64.0% of sales and fixed expenses total \$13,500, the break-even point in quantity and dollar(\$) will be:

2. Best Client Company has sales of 1,300 units at \$60 a unit. Variable expenses are 45% of the selling price and total fixed expenses are \$37,180. If Cartel Company expects next year's total sales could increase 14%, they want to know how this change affects their profit. Calculate DOL and then, using DOL, calculate next year's net income in dollar.

3. At the end of the year, actual manufacturing overhead costs were \$120,000 and applied manufacturing overhead costs were \$160,175. Ifthe denominator activity for the year was 20,000 machine-hours, and if21,500 standard machine­ hours were allowed for the year's production, Calculate the predetermined overhead rate per machine-hour.

4. Central Company has two product lines, J and K. During June, the company's net operating income was \$25,000, and the common fixed expenses were \$37,000. The contribution margin ratio for J was 30%, its sales were \$200,000, and its segment margin was \$21,000. If the contribution margin for K was \$80,000, Calculate the segment margin for K.
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1. ## Solution: Division-A makes a part that it sells to customers outside

Tutorial # 00004714 Posted By: mac123 Posted on: 12/08/2013 04:21 AM
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