Question

In: Accounting

The following question presents hypothetical data concerning transfer of cotton between departments as part of the...

The following question presents hypothetical data concerning transfer of cotton between departments as part of the Cotton On Group's production processes. The textile department produces cotton for use by various other production departments within the Cotton On Group. The costs incurred by the textile department to produce cotton are provided below:

Cost per square metre
Direct materials $2.10
Direct labour $0.50
Variable overhead $0.25
Fixed overhead $0.15

The textile department can also sell cotton to external customers for $5.00 per square metre. Sales staff from the textile department are paid a sales commission of $0.10 per square metre for sales to external customers. No sales commissions are paid for transfers to internal customers.

Required

  1. Provide and discuss three examples which illustrate how cost-plus pricing could be used to set the internal transfer price for cotton and how these prices impact departmental profitability.
  2. Measure and discuss the internal transfer price for cotton if the general transfer price rule is used in the following situations:
    1. The textile department has infinite capacity .
    2. The textile department has no spare capacity .
    3. The textile department has capacity to produce 50,000 metres, internal demand is 40,000 metres and external demand is 17,000 metres .

Solutions

Expert Solution


Related Solutions

The following question presents hypothetical data concerning transfer of cotton between departments as part of the...
The following question presents hypothetical data concerning transfer of cotton between departments as part of the Cotton On Group's production processes. The textile department produces cotton for use by various other production departments within the Cotton On Group. The costs incurred by the textile department to produce cotton are provided below: Cost per square metre Direct materials $2.10 Direct labour $0.50 Variable overhead $0.25 Fixed overhead $0.15 The textile department can also sell cotton to external customers for $5.00 per...
The following question presents hypothetical data concerning transfer of cotton between departments as part of the...
The following question presents hypothetical data concerning transfer of cotton between departments as part of the Cotton On Group's production processes. The textile department produces cotton for use by various other production departments within the Cotton On Group. The costs incurred by the textile department to produce cotton are provided below: Cost per square metre Direct materials $2.10 Direct labour $0.50 Variable overhead $0.25 Fixed overhead $0.15 The textile department can also sell cotton to external customers for $5.00 per...
Transfer Pricing Vans produces a range of lifestyle footwear styles. The following question presents hypothetical data...
Transfer Pricing Vans produces a range of lifestyle footwear styles. The following question presents hypothetical data concerning the transfer of rubber from Vans' Rubber Department to the firm's Assembly Department. Beyond supplying other internal departments, the Rubber Department can also sell rubber to external customers for $2.00/kg. Relevant cost data for each department is supplied below. Rubber Department (price per kg of Rubber) Assembly Department (price per unit) Market price $2.00 $130.00 Direct Materials $1.00 $35.00* Direct Labour $0.20 $20.00...
Consider a hypothetical open economy. The following table presents data on the relationship between various real...
Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget.Real Interest RateNational SavingDomestic InvestmentNet Capital Outflow(Percent)(Billions of dollars)(Billions of dollars)(Billions of dollars)76030-1065540-555050044560534070102358015Given the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next,...
Arbon Company has three service departments and two operating departments. Selected data concerning the five departments...
Arbon Company has three service departments and two operating departments. Selected data concerning the five departments are presented below: Service Departments Operating Departments Administrative Janitorial Equipment Maintenance Prep Finishing Total   Costs $ 92,000 $ 67,800 $ 36,000 $ 256,100 $ 498,600 $ 950,500   Number of employees 80 60 240 600 300 1,280   Square metres of space occupied 300 1,200 1,000 2,000 7,000 11,500   Machine-hours 26,000 54,000 80,000      The company allocates service department costs by the step-down method in the following...
Question 2 The following table presents data on the output produced at different levels of labour...
Question 2 The following table presents data on the output produced at different levels of labour inputs. Labour input (workers per week) Output (goods per week) Marginal productof labour (MPL) Average product oflabour (APL) 0 0 1 350 2   800 3 1220 4 1560 5 1770 6 1800 i) Calculate the marginal product of labour (MPL) and the average product of labour (APL) to complete the table and then show the respective curves. ii) What is the level of labour...
******Show work, no Exel/Spss please!!!!****** To answer this question, refer to the following hypothetical data collected...
******Show work, no Exel/Spss please!!!!****** To answer this question, refer to the following hypothetical data collected using replicated measures design. Subject 1 2 3 4 5 6 7 8 9 10 Pre 50 49 37 16 80 42 40 58 31 21 Post 56 50 30 25 90 44 60 71 32 22 a) In a two-tailed test of H 0 using α=0.05, what is p(obtained) for the results shown? *Hint: "two-tailed" means the same thing as nondirectional. ANSWER =...
Match the following answers to the corresponding question concerning respiratory chemistry. define hemoglobin saturation what part...
Match the following answers to the corresponding question concerning respiratory chemistry. define hemoglobin saturation what part of the heme unit of hemoglobin does oxygen bond tond to what does it mean for hemoglobin to be 100% saturated? under normal conditions, what is hemoglobin saturation if blood PO2 is 40 mm Hg? under normal conditions, what is hemoglobin saturation if blood PO2 is 60 mm Hg? What PO2 will provide 100% saturation? What will happen to your blood pH in the...
In an article in Advertising Age, Nancy Giges studies global spending patterns. Giges presents data concerning...
In an article in Advertising Age, Nancy Giges studies global spending patterns. Giges presents data concerning the percentage of adults in various countries who have purchased various consumer items (such as soft drinks, athletic footware, blue jeans, beer, and so on) in the past three months. (Round answer to 4 decimal places.) (a) Suppose we wish to justify the claim that fewer than 50 percent of adults in Germany have purchased blue jeans in the past three months. The survey...
3. Effects of a government budget deficit Consider a hypothetical open economy. The following table presents...
3. Effects of a government budget deficitConsider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget.On the following graph, plot the relationship between the real interest rate and net capital outflow by using the green points (triangle symbol) to plot the points...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT