Phoenix Inc., a cellular communication company, has multiple business units, organized as divisions. Each division’s management is compensated based on the division’s operating income. Division A currently purchases cellular equipment from outside markets and uses it to produce communication systems. Division B produces similar cellular equipment that it sells to outside customers—but not to division A at this time. Division A’s manager approaches division B’s manager with a proposal to buy the equipment from division B. If it produces the cellular equipment that division A desires, division B will incur variable manufacturing costs of $60 per unit.

Relevant Information about Division B

Sells 75,000 units of equipment to outside customers at $130 per unit

Operating capacity is currently 80%; the division can operate at 100%

Variable manufacturing costs are $70 per unit

Variable marketing costs are $8 per unit

Fixed manufacturing costs are $780,000

Income per Unit for Division A (assuming parts purchased externally, not internally from division B)

Required:

1. Division A wants to buy 37,500 units from Division B at $75 per unit. Should Division B accept or reject the proposal to sell the 37,500 units?

(a). Calculate the net operating profit or loss to Division B and to the firm as a whole if the 37,500 units are sold to Division A.

(b.) Calculate the net benefit to the firm as a whole if Division A will accept a partial shipment from Division B.

2. What is the range of transfer prices over which the divisional managers might negotiate a final transfer price?

Cost Management: A Strategic Emphasis (8th Edition) Chapter 19, Problem 49

Transfer Pricing;

Decision Making Phoenix Inc., a cellular communication company, has multiple business units, organized as divisions. Each division’s management is compensated based on the division’s operating income.

Division A currently purchases cellular equipment from outside markets and uses it to produce communication systems.

Division B produces similar cellular equipment that it sells to outside customers—but not to division A at this time.

Division A’s manager approaches division B’s manager with a proposal to buy the equipment from division B.

If it produces the cellular equipment that division A desires, division B will incur variable manufacturing costs of $60 per unit.

Relevant Information about Division B
Sells 50,000 units of equipment to outside customers at $130 per unit
Operating capacity is currently 80%; the division can operate at 100%
Variable manufacturing costs are $70 per unit
Variable marketing costs are $8 per unit
Fixed manufacturing costs are $580,000

Income per Unit for Division A (assuming parts purchased externally, not internally from division B)
Sales revenue $320
Manufacturing costs:
Cellular equipment 80
Other materials 10
Fixed costs 40
Total manufacturing costs 130
Gross margin 190
Marketing costs:
Variable 35
Fixed 15
Total marketing costs 50
Operating income per unit $140

Required
1. Division A wants to buy 25,000 units from division B at $75 per unit.

Should division B accept or reject the proposal?

How would your answer differ if (a) division A requires all 25,000 units in the order to be shipped by the same supplier, or (b) division A would accept partial shipment from division B?

2. What is the range of transfer prices over which the divisional managers might negotiate a final transfer
price? Provide a rationale for the range you provide.

Phoenix Inc., a cellular communication company, has multiple business units, organized as divisions. Each division’s management is compensated based on the division’s operating income. Division A currently purchases cellular equipment from outside markets and uses it to produce communication systems. Division B produces similar cellular equipment that it sells to outside customers—but not to division A at this time. Division A’s manager approaches division B’s manager with a proposal to buy the equipment from division B. If it produces the cellular equipment that division A desires, division B will incur variable manufacturing costs of $60 per unit.

Relevant Information about Division B

Sells 95,000 units of equipment to outside customers at $130 per unit

Operating capacity is currently 80%; the division can operate at 100%

Variable manufacturing costs are $70 per unit

Variable marketing costs are $8 per unit

Fixed manufacturing costs are $940,000

Income per Unit for Division A (assuming parts purchased externally, not internally from division B)

Required:

1. Division A wants to buy 47,500 units from Division B at $75 per unit. Should Division B accept or reject the proposal to sell the 47,500 units? (a). Calculate the net operating profit or loss to Division B and to the firm as a whole if the 47,500 units are sold to Division A. (b.) Calculate the net benefit to the firm as a whole if Division A will accept a partial shipment from Division B.

2. What is the range of transfer prices over which the divisional managers might negotiate a final transfer price?

Winters Hardware Store completed the following merchandising transactions in the month of May. At the beginning of May, Winters’ ledger showed Cash of $11,200 and Common Stock of $11,200.

a) Journalize the transactions using a perpetual inventory system. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

b) Post the transactions to T-accounts. Be sure to enter the beginning cash and commo stock balances. (Post entries in the order of journal entries posted in part 1.)

c) Prepare an income statement through gross profit for the month of May 2014.

a) Does the AD curve shift to the right more or less than the LRAS curve in a dynamic AD-AS model from 2006 to 2007? Explain why verbally.

b) Explain why the Federate Funds Rate declines from 2007 to 2009 using Taylor Rule. Based on the Federate Funds Rate data in the table, explain the limitation of monetary policy that is implemented through open market operation during severe recession.

c) Suppose a military operation that costs $200 billion in 2011 can help the real GDP recover to $16.2 trillion one year earlier. What is the minimal required MPC of households in the Aggregate Expenditure model if there is no tax wedge on household income? What if the tax wedge is 1/3 of the pretax household income? What is the difference between the answer based on the Aggregate Expenditure model and the answer based on the static AD-AS model.

d) There was large fiscal stimulus during 2009-2011. People believe that fiscal stimulus is more powerful in 2011 compared to 2017. Explain why this can be true using the Federal Funds Rate data.

Once upon a time, there was a small country called Bobistan. Bobistan had, overall, a fairly healthy population. However, in Bobawa, the capital city, there has been a rise in the number of people with Type 2 diabetes in the last 5 years. Bobistan is a relatively flat country, with a population of only 1.6 million people. In the last 10 years, Bobistonians have moved away from their traditional diets and started importing foods- in fact, a well-known fast-food chain recently opened up in the middle of Bobawa. Traditionally, most people traveled on horseback, but now things like cars and motorcycles are being seen more frequently. In addition, there are now more doctors than there used to be, and women are able to see a physician during their pregnancy routinely.

Using the 3 paradigms that you’ve read about, discuss the possible causal factors for this sudden rise. Be sure to support your arguments with your readings.

In addition, be sure to touch on 1-2 limitations of your overall argument(s), again, using your readings.

References

Bonita, R., Beaglehole, R., & Kjellstrom, T. (2006). Chapter 1: What is epidemiology? In Basic Epidemiology. World Health Organization. Accessed at: http://apps.who.int/iris/bitstream/handle/10665/43541/9241547073_eng.pdf?sequence=1&isAllowed=y or to download here.

Pheasant, H. (2008). 2a - Epidemiological paradigms. In Disease Causation and Diagnostic. (Please Read the following sections: Programming, Adult Risk Factor Approaches, and Life-Course). Accessed at: https://www.healthknowledge.org.uk/public-health-textbook/disease-causation-diagnostic/2a-epidemiological-paradigms

Kirwan, M. (2006). 2b - Epidemiology of diseases of public health significance. In Disease Causation and Diagnostic. (Please read the following sections: Infectious Diseases, Cancers of Public Health Significance, Specific Chronic Diseases, and Epidemiological Frameworks). Accessed at: https://www.healthknowledge.org.uk/public-health-textbook/disease-causation-diagnostic/2b-epidemiology-diseases-phs

Sleepeze Company produces mattresses for 20 retail outlets. Of the 20 retail outlets, 19 are small, separately owned furniture stores and one is a retail chain. The retail chain buys 60% of the mattresses produced. The 19 smaller customers purchase mattresses in approximately equal quantities, where the orders are about the same size. Data concerning Sleepeze’s customer activity are as follows:

Currently, customer-driven costs are assigned to customers based on units sold, a unit-level driver

Required:

Assign costs to customers by using an ABC approach. Round your answers and all intermediate calculations to the nearest dollar.

As online banking technology improves, and people become more comfortable with its use, banks are increasingly electing to replace full-service branches with ATM-only locations (in order to reduce costs). Imagine a local bank is considering making this transition. In order to ensure that such a switch would not result in a significant loss of customers, the bank branch hires a company to conduct a study to sample a portion of its customer base and solicit their thoughts on the possibility of the branch transitioning to ATM-only. You are an intern, working with the statistical expert tasked with completing the study for the bank. She is interested in your thoughts on the project, and has asked you to write up your answers to the following questions, devoting a short paragraph to each question.

1. Identify the sampling method (Cluster, Simple Random Sample, Stratified Random Sample, Convenience, etc.) that would best ensure that your sample would reflect the overall population of branch customers. Briefly explain your reasoning.

2. If the bank’s population is comprised of 2500 local customers, how many do you think would be good to survey?

Activity-Based Customer Costing

Sleepeze Company produces mattresses for 20 retail outlets. Of the 20 retail outlets, 19 are small, separately owned furniture stores and one is a retail chain. The retail chain buys 60% of the mattresses produced. The 19 smaller customers purchase mattresses in approximately equal quantities, where the orders are about the same size. Data concerning Sleepeze’s customer activity are as follows:

Currently, customer-driven costs are assigned to customers based on units sold, a unit-level driver.

Required:

Assign costs to customers by using an ABC approach. Round your answers and all intermediate calculations to the nearest dollar.

Question 1:

You have been hired by UrTaxi - a taxi service company in Brisbane which drives customers home in drivers’ personal cars. Customers currently phone in to book a driver and pay cash on arrival. The current system is a simple spreadsheet with a basic AIS. UrTaxi have decided it was time to go online and they would like customers to register online and book and pay for their trips online. The CEO of the business would like to upgrade their accounting system and have hired you as a consultant, to develop/acquire the necessary systems. Current staff are wary of change and are do not seem too pleased about a new way of doing things. The CEO has warned you about this and has asked you to help with minimising user resistance.

As a consultant, which Systems Development Life Cycle stage/s would you refer to prior to acquiring a suitable accounting system for this new business?

Would the online nature of their business impact on your decision?

What would you do to help minimise user resistance?

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