1. Assume the Assembly division of Baxter Bicycles wants to buy 4,300 trailers per year from the Trailer division. If the Trailer division can sell all of the trailers it manufactures to outside customers (and has no excess capacity), what price should be used on transfers between divisions? 2. Assume the Trailer division currently only sells 9,200 trailers to outside customers and has excess capacity. The Assembly division wants to buy 4,300 trailers per year from the Trailer division. What is the range of acceptable prices on transfers between divisions? 1. Transfer price per trailer 2. Transfer price per trailer will be at least but not more than

1. Assume the Assembly division of Baxter Bicycles wants to buy 4,300 trailers per year from the Trailer division. If the Trailer division can sell all of the trailers it manufactures to outside customers (and has no excess capacity), what price should be used on transfers between divisions? 2. Assume the Trailer division currently only sells 9,200 trailers to outside customers and has excess capacity. The Assembly division wants to buy 4,300 trailers per year from the Trailer division. What is the range of acceptable prices on transfers between divisions? 1. Transfer price per trailer 2. Transfer price per trailer will be at least but not more than

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 4EB: Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all...

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Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all 30,000 for $240 each. Country Enterprises has approached Dimitri to buy 800 chairs for $210 each. Dimitris normal variable cost is $165 per chair, including $50 per unit in direct labor per chair. Dimitri can produce the special order on an overtime shift, which means that direct labor would be paid overtime at 150% of the normal pay rate. The annual fixed costs will be unaffected by the special order and the contract will not disrupt any of Dimitris other operations. What will be the impact on profits of accepting the order?
Jansen Crafters has the capacity to produce 50,000 oak shelves per year and is currently selling 44,000 shelves for $32 each. Cutrate Furniture approached Jansen about buying 1,200 shelves for bookcases it is building and is willing to pay $26 for each shelf. No packaging will be required for the bulk order. Jansen usually packages shelves for Home Depot at a price of $1.50 per shell. The $1.50 per-shelf cost is included in the unit variable cost of $27, with annual fixed costs of $320.000. However, the $130 packaging cost will not apply in this case. The fixed costs will be unaffected by the special order and the company has the capacity to accept the order. Based on this information, what would be the profit if Jansen accepts the special order? A. Profits will decrease by $1,200. B. Profits will increase by $31,200. C. Profits will increase by $600. D. Profits will increase by $7,200.
Country Diner currently makes cookies for its boxed lunches. It uses 40,000 cookies annually in the production of the boxed lunches. The costs to make the cookies are: A potential supplier has offered to sell Country Diner the cookies for $0.85 each. If the cookies are purchased, 10% of the fixed overhead could be avoided. If Jason accepts the offer, what will the effect on profit be?
Reubens Deli currently makes rolls for deli sandwiches it produces. It uses 30,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are: A potential supplier has offered to sell Reuben the rolls for $0.90 each. If the rolls are purchased, 30% of the fixed overhead could be avoided, If Reuben accepts the offer, what will the effect on profit be?
Akimotos Bicycle Co assembles three types of bicycles: Charger, Sublime, Kidde. Due to their residential location they operate with one 8 hour shift, 5 days per week, 50 weeks a year. Balancing the bikes is the bottleneck. The information about production time and costs for these three bicycles are: A. How many of each bicycle should be produced to maximize profits? B. What qualitative factors would you need to consider?
Shelby Industries has a capacity to produce 45.000 oak shelves per year and is currently selling 40,000 shelves for $32 each. Martin Hardwoods has approached Shelby about buying 1,200 shelves for a new project and is willing to pay $26 each. The shelves can be packaged in bulk; this saves Shelby $1.50 per shelf compared to the normal packaging cost. Shelves have a unit variable cost of $27 with fixed costs of $350,000. Because the shelves dont require packaging, the unit variable costs for the special order will drop from $27 per shelf to $25.50 per shelf. Shelby has enough idle capacity to accept the contract. What is the minimum price per shelf that Shelby should accept for this special order?
Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and trim kits. Fixed cost equals 146,000. Each door handle sells for 12 and has variable cost of 9; each trim kit sells for 8 and has variable cost of 5. Required: 1. What are the contribution margin per unit and the contribution margin ratio for door handles and for trim kits? 2. If Polaris sells 20,000 door handles and 40,000 trim kits, what is the operating income? 3. How many door handles and how many trim kits must be sold for Polaris to break even? 4. CONCEPTUAL CONNECTION Assume that Polaris has the opportunity to rearrange its plant to produce only trim kits. If this is done, fixed costs will decrease by 35,000, and 70,000 trim kits can be produced and sold. Is this a good idea? Explain.
The Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry children or cargo. The trailers have a market price of $98 each. Each trailer incurs $41 of variable manufacturing costs. The Trailer division has capacity for 26,000 trailers per year and has fixed costs of $420,000 per year.Assume the Assembly division of Baxter Bicycles wants to buy 4,100 trailers per year from the Trailer division. If the Trailer division can sell all of the trailers it manufactures to outside customers (and has no excess capacity), what price should be used on transfers between divisions?Assume the Trailer division currently only sells 10,300 trailers to outside customers and has excess capacity. The Assembly division wants to buy 4,100 trailers per year from the Trailer division. What is the range of acceptable prices on transfers between divisions?
The Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry children or cargo. The trailers have a retail price of $103 each. Each trailer incurs $48 of variable manufacturing costs. The Trailer division has capacity for 29,000 trailers per year and incurs fixed costs of $490,000 per year. Required:1. Assume the Assembly division of Baxter Bicycles wants to buy 4,400 trailers per year from the Trailer division. If the Trailer division can sell all of the trailers it manufactures to outside customers, what price should be used on transfers between Baxter Bicycles's divisions?2. Assume the Trailer division currently only sells 9,200 Trailers to outside customers, and the Assembly division wants to buy 4,400 trailers per year from the Trailer division. What is the range of acceptable prices that could be used on transfers between Baxter Bicycles's divisions?
The Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry childrenor cargo. The trailers have a retail price of $200 each. Each trailer incurs $80 of variable manufacturingcosts. The Trailer division has capacity for 40,000 trailers per year and incurs fixed costs of $1,000,000per year. Assume the Assembly division of Baxter Bicycles wants to buy 15,000 trailers per year from the Trailer division. If the Trailer division can sell all of the trailers it manufactures to outside customers, what price should be used on transfers between Baxter Bicycles’s divisions? Explain.
Maple Incorporated manufactures a product that costs $33 per unit plus $45,000 in fixed costs each month. Maple currently sells 4,000 of these units per month for $63 each. If Maple leased a machine for $12,000 a month, it could add features to the product that would allow it to increase the selling price. It would cost an additional $8 per unit to add these features. How much would Maple have to charge for the product with additional features to make it worthwhile to lease the machine?
The Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry childrenor cargo. The trailers have a retail price of $200 each. Each trailer incurs $80 of variable manufacturingcosts. The Trailer division has capacity for 40,000 trailers per year and incurs fixed costs of $1,000,000per year. Assume the Trailer division currently only sells 20,000 Trailers to outside customers, and the Assembly division wants to buy 15,000 trailers per year from the Trailer division. What is the range of acceptable prices that could be used on transfers between Baxter Bicycles’s divisions? Explain.