Calculate and compare the difference in overall corporate net income between Scenario A and Scenario B if the Assembly Division sells 100,000 pairs of shoes for $60 per pair to customers

ACCOUNTING

Multiple Choice

Calculate the Division operating income for the BetaShoe Company which manufacturers only one type of shoe and has two divisions, the Sole Division, and the Assembly Division. The Sole Division manufactures soles for the Assembly Division, which completes the shoe and sells it to retailers. The Sole Division "sells" soles to the Assembly Division. The market price for the Assembly Division to purchase a pair of soles is $20. (Ignore changes in inventory.) The fixed costs for the Sole Division are assumed to be the same over the range of 40,000-100,000 units. The fixed costs for the Assembly Division are assumed to be $7 per pair at 100,000 units.


Sole's costs per pair of soles are:

Direct materials $4

Direct labor $3

Variable overhead $2

Division fixed costs $1


Assembly's costs per completed pair of shoes are:

Direct materials $6

Direct labor $2

Variable overhead $1

Division fixed costs $7


Calculate and compare the difference in overall corporate net income between Scenario A and Scenario B if the Assembly Division sells 100,000 pairs of shoes for $60 per pair to customers.

Scenario A: Negotiated transfer price of $15 per pair of soles

Scenario B: Market-based transfer price

a. $500,000 more net income under Scenario A

b. $500,000 of net income using Scenario B

c. $100,000 of net income using Scenario A.

d. none of the above

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What is the transfer price per pair of shoes from the Sole Division to the Assembly Division per pair of soles if the transfer price per pair of soles is 125% of full costs

ACCOUNTING

Multiple Choice

Calculate the Division operating income for the BetaShoe Company which manufacturers only one type of shoe and has two divisions, the Sole Division, and the Assembly Division. The Sole Division manufactures soles for the Assembly Division, which completes the shoe and sells it to retailers. The Sole Division "sells" soles to the Assembly Division. The market price for the Assembly Division to purchase a pair of soles is $20. (Ignore changes in inventory.) The fixed costs for the Sole Division are assumed to be the same over the range of 40,000-100,000 units. The fixed costs for the Assembly Division are assumed to be $7 per pair at 100,000 units.


Sole's costs per pair of soles are:

Direct materials $4

Direct labor $3

Variable overhead $2

Division fixed costs $1


Assembly's costs per completed pair of shoes are:

Direct materials $6

Direct labor $2

Variable overhead $1

Division fixed costs $7


What is the transfer price per pair of shoes from the Sole Division to the Assembly Division per pair of soles if the transfer price per pair of soles is 125% of full costs?

a. $10

b. $12.50

c. $13

d. $15

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What is the transfer price per pair of soles from the Sole Division to the Assembly Division if the method used to place a value on each pair of soles is 180% of variable costs

ACCOUNTING

Multiple Choice

Calculate the Division operating income for the BetaShoe Company which manufacturers only one type of shoe and has two divisions, the Sole Division, and the Assembly Division. The Sole Division manufactures soles for the Assembly Division, which completes the shoe and sells it to retailers. The Sole Division "sells" soles to the Assembly Division. The market price for the Assembly Division to purchase a pair of soles is $20. (Ignore changes in inventory.) The fixed costs for the Sole Division are assumed to be the same over the range of 40,000-100,000 units. The fixed costs for the Assembly Division are assumed to be $7 per pair at 100,000 units.


Sole's costs per pair of soles are:

Direct materials $4

Direct labor $3

Variable overhead $2

Division fixed costs $1


Assembly's costs per completed pair of shoes are:

Direct materials $6

Direct labor $2

Variable overhead $1

Division fixed costs $7


What is the transfer price per pair of soles from the Sole Division to the Assembly Division if the method used to place a value on each pair of soles is 180% of variable costs?

a. $14.40

b. $12.60

c. $16.20

d. $28.80

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What is the market-based transfer price per pair of soles from the Sole Division to the Assembly Division

ACCOUNTING

Multiple Choice

Calculate the Division operating income for the BetaShoe Company which manufacturers only one type of shoe and has two divisions, the Sole Division, and the Assembly Division. The Sole Division manufactures soles for the Assembly Division, which completes the shoe and sells it to retailers. The Sole Division "sells" soles to the Assembly Division. The market price for the Assembly Division to purchase a pair of soles is $20. (Ignore changes in inventory.) The fixed costs for the Sole Division are assumed to be the same over the range of 40,000-100,000 units. The fixed costs for the Assembly Division are assumed to be $7 per pair at 100,000 units.


Sole's costs per pair of soles are:

Direct materials $4

Direct labor $3

Variable overhead $2

Division fixed costs $1


Assembly's costs per completed pair of shoes are:

Direct materials $6

Direct labor $2

Variable overhead $1

Division fixed costs $7


What is the market-based transfer price per pair of soles from the Sole Division to the Assembly Division?

a. $10

b. $16

c. $20

d. $26

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Assume 200 barrels are transferred from the Production Division to the Refining Division for a transfer price of $6 per barrel

ACCOUNTING

Multiple Choice

Dakoil Corporation has two divisions, Refining and Production. The company's primary product is Enkoil Oil. Each division's costs are provided below:


Production: Variable costs per barrel of oil $ 3

Fixed costs per barrel of oil $ 2

Refining: Variable costs per barrel of oil $10

Fixed costs per barrel of oil $12


The Refining Division has been operating at a capacity of 40,000 barrels a day and usually purchases 25,000 barrels of oil from the Production Division and 15,000 barrels from other suppliers at $20 per barrel.


Assume 200 barrels are transferred from the Production Division to the Refining Division for a transfer price of $6 per barrel. The Refining Division sells the 200 barrels at a price of $40 each to customers. What is the operating income of both divisions together?

a. $2,400

b. $2,600

c. $3,600

d. $6,800

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What is the transfer price per barrel from the Production Division to the Refining Division, assuming the method used to place a value on each barrel of oil is 110% of full costs

ACCOUNTING

Multiple Choice

Dakoil Corporation has two divisions, Refining and Production. The company's primary product is Enkoil Oil. Each division's costs are provided below:


Production: Variable costs per barrel of oil $ 3

Fixed costs per barrel of oil $ 2

Refining: Variable costs per barrel of oil $10

Fixed costs per barrel of oil $12


The Refining Division has been operating at a capacity of 40,000 barrels a day and usually purchases 25,000 barrels of oil from the Production Division and 15,000 barrels from other suppliers at $20 per barrel.


What is the transfer price per barrel from the Production Division to the Refining Division, assuming the method used to place a value on each barrel of oil is 110% of full costs?

a. $5.50

b. $22.00

c. $24.20

d. $29.70

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What is the transfer price per barrel from the Production Division to the Refining Division, assuming the method used to place a value on each barrel of oil is 180% of variable costs

ACCOUNTING

Multiple Choice

Dakoil Corporation has two divisions, Refining and Production. The company's primary product is Enkoil Oil. Each division's costs are provided below:


Production: Variable costs per barrel of oil $ 3

Fixed costs per barrel of oil $ 2

Refining: Variable costs per barrel of oil $10

Fixed costs per barrel of oil $12


The Refining Division has been operating at a capacity of 40,000 barrels a day and usually purchases 25,000 barrels of oil from the Production Division and 15,000 barrels from other suppliers at $20 per barrel.


What is the transfer price per barrel from the Production Division to the Refining Division, assuming the method used to place a value on each barrel of oil is 180% of variable costs?

a. $5.40

b. $9.00

c. $18.00

d. $23.40

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