Question

In: Accounting

Bramble Electronics operates as a decentralized company. Bramble’s Battery division manufactures batter chargers that are sold...

Bramble Electronics operates as a decentralized company. Bramble’s Battery division manufactures batter chargers that are sold both externally to outside customers and internally to the Camera division. Battery division’s annual capacity is 83,700 units. The revenue and costs associated with one battery charger are as follows:

Selling Price to external customers $21
Variable Cost 13
Fixed Cost (based on capacity) 4


The Camera division would like to purchase 25,110 units of battery chargers; however, Cameron, the manager of the Camera division, is able to purchase the battery charger from an overseas supplier at $19.

Assuming the Battery division operates at 85% capacity, what is the range of the transfer price, if any, for the battery charger? Cameron has learned that the Battery division operates below its capacity. He is willing to pay up to $18.50 for a battery charger. Should the Battery division accept the offer at $18.50?

Minimum ? TP ?

Maximum

The range $_______   ? TP ? $_________

The Battery division _____(should/should not) accept the offer to transfer the battery chargers at $18.50.

Solutions

Expert Solution

given that

annual capacity = 83700 units

variable cost = $13

operators capacity = 85%

total capacity = annual capacity / operators capacity

= 83700 / 85%

= 98470 (rounded off)

vacant capacity = total capacity - annual capacity

=98470 - 83700

= 14770 units

additional quantity required = 25110 units

so, the required quantity can not be manufactured in the vacant capacity with loss of the contribution

The Battery division would atleast want to recover its variable costs incurred on manufacturing

therefore , the minimum transfer price = 13 per battery

As regards the maximum transfer price, the Camera division can pay at maximum what it is the amount paying in the market for one battery.

therefore, the maximum transfer price is = 19 per battery

the range of transfer price is 18.5 :

18.5 is morethan or equal to 13 and less than or equal to 19

The Camera division is willing to pay $18.5 per battery which is more than the minimum transfer price of $13 required by the Battery division

therefore, the battary division should accept the offer to transfer the battary with the cost of $ 18.5

ekkarill92 answered 7 months ago
Next > < Previous

Related Solutions

Bramble Electronics operates as a decentralized company. Bramble’s Battery division manufactures batter chargers that are sold...
Bramble Electronics operates as a decentralized company. Bramble’s Battery division manufactures batter chargers that are sold both externally to outside customers and internally to the Camera division. Battery division’s annual capacity is 83,700 units. The revenue and costs associated with one battery charger are as follows: Selling Price to external customers $21 Variable Cost 13 Fixed Cost (based on capacity) 4 The Camera division would like to purchase 25,110 units of battery chargers; however, Cameron, the manager of the Camera...
Dilithium Batteries is a division of Enterprise Corporation. The division manufactures and sells a long-life battery...
Dilithium Batteries is a division of Enterprise Corporation. The division manufactures and sells a long-life battery used in a wide variety of applications. During the coming year, it expects to sell 60,000 units for $32 per unit. Nyota Uthura is the division manager. She is considering producing either 60,000 or 90,000 units during the period. Other information is presented in the schedule. Division Information for 2020 Beginning inventory 0 Expected sales in units 60,000 Selling price per unit $32 Variable...
Dilithium Batteries is a division of Enterprise Corporation. The division manufactures and sells a long-life battery...
Dilithium Batteries is a division of Enterprise Corporation. The division manufactures and sells a long-life battery used in a wide variety of applications. During the coming year, it expects to sell 60,000 units for $35 per unit. Nyota Uthura is the division manager. She is considering producing either 60,000 or 90,000 units during the period. Other information is presented in the schedule. Division Information for 2020 Beginning inventory 0 Expected sales in units 60,000 Selling price per unit $35 Variable...
Dilithium Batteries is a division of Enterprise Corporation. The division manufactures and sells a long-life battery...
Dilithium Batteries is a division of Enterprise Corporation. The division manufactures and sells a long-life battery used in a wide variety of applications. During the coming year, it expects to sell 60,000 units for $32 per unit. Nyota Uthura is the division manager. She is considering producing either 60,000 or 90,000 units during the period. Other information is presented in the schedule. Division Information for 2020 Beginning inventory 0 Expected sales in units 60,000 Selling price per unit $32 Variable...
Smith Company sold merchandise in the amount of $5,800 to Batter Company on September 1, with...
Smith Company sold merchandise in the amount of $5,800 to Batter Company on September 1, with credit terms of 2/10, n/30. The cost of the merchandise is $2,400. On September 4, Batter Company returns some of the merchandise, which were put back into Smith's inventory. The selling price and the cost of the returned merchandise are $800 and $500, respectively. (Assume both companies use the perpetual inventory method.) Batter Company's journal entry on September 8, when they pay the amount...
Bramble Company manufactures a line of lightweight running shoes. CEO Mark Bramble estimated that the company...
Bramble Company manufactures a line of lightweight running shoes. CEO Mark Bramble estimated that the company would incur $3,412,240 in manufacturing overhead during the coming year. Additionally, he estimated the company would operate at a level requiring 221,000 direct labor hours and 598,639 machine hours. 1) Assume that Bramble Company uses direct labor hours as its manufacturing overhead application base. Calculate the company’s predetermined overhead rate. (Round answer to 2 decimal places, e.g. 52.75.) 2) Assume that job 4375 required...
West Company operates two divisions (Division A and Division B). TOTAL company sales = $500,000. Division...
West Company operates two divisions (Division A and Division B). TOTAL company sales = $500,000. Division A sales represent 40% of the total. Also, Division B reports the following information: Contribution margin = 45.0%; Traceable AND controllable fixed expenses = $68,000; and segment margin = 8.0%. Required: Compute Traceable NOT Controllable fixed expenses for Division B
Division A manufactures electronic circuit boards. The boards can be sold either to Division B of...
Division A manufactures electronic circuit boards. The boards can be sold either to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: Selling price per circuit board $ 187 Variable cost per circuit board $ 110 Number of circuit boards: Produced during the year 21,400 Sold to outside customers 14,500 Sold to Division B 6,900    Sales to Division B were at the same price as sales to outside customers....
Division A manufactures electronic circuit boards. The boards can be sold either to Division B of...
Division A manufactures electronic circuit boards. The boards can be sold either to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: Selling price per circuit board $ 186 Variable cost per circuit board $ 128 Number of circuit boards: Produced during the year 22,000 Sold to outside customers 14,500 Sold to Division B 7,500    Sales to Division B were at the same price as sales to outside customers....
Division A manufactures electronic circuit boards. The boards can be sold either to Division B of...
Division A manufactures electronic circuit boards. The boards can be sold either to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: Selling price per circuit board $ 187 Variable cost per circuit board $ 117 Number of circuit boards: Produced during the year 20,100 Sold to outside customers 14,700 Sold to Division B 5,400    Sales to Division B were at the same price as sales to outside customers....
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT