Question

Karakomi Cameras Inc. has a Disposables Division that produces a camera that sells for $11.00 per unit in the open market. The cost of the product is $8.15 (variable manufacturing of $5.00, plus fixed manufacturing of $3.15). Total fixed manufacturing costs are $220,500 at the normal annual production volume of 70,000 units. The Overseas Division has offered to buy 20,000 units at the full cost of $8.15. The Disposables Division has excess capacity, and the 20,000 units can be produced without interfering with the current outside sales of 70,000 units. The total fixed cost of the Disposables Division will not change. Explain whether the Disposables Division should accept or reject the offer. Show calculations. Compute net income at normal annual production volume. Do not use a negative sign with your answers. Karakomi Cameras, Inc. Disposables Division Unit Margins Current Sales Per Unit Total Sales $Answer 11 $Answer 770,000 Variables costs Answer 5 Answer 350,000 Contribution margin Answer 6 Answer 420,000 Fixed costs: Answer 3.15 Answer 220,500 Net income $Answer 25.15 $Answer 199,500 Compute net income including the offer to purchase additional cameras. Do not use a negative sign with your answers. New Sales Proposed Sales Per Unit Total Grand Total Sales $Answer 8.15 $Answer 163,000 $Answer 933,000 Variable costs Answer 5 Answer 100,000 Answer 450,000 Contribution margin Answer 3.15 $Answer 63,000 Answer 483,000 Fixed costs: Answer 3.15 Answer 220,500 Net income $Answer 0 $Answer 262,500

Answer #1

Transfer Prices at Full Cost with Excess Capacity: Divisional
Viewpoint Karakomi Cameras Inc. has a Disposables Division that
produces a camera that sells for $14.00 per unit in the open
market. The cost of the product is $11.30 (variable manufacturing
of $5.00, plus fixed manufacturing of $6.30). Total fixed
manufacturing costs are $441,000 at the normal annual production
volume of 70,000 units. The Overseas Division has offered to buy
20,000 units at the full cost of $11.30. The Disposables Division...

Transfer Prices at Full Cost with Excess Capacity: Divisional
Viewpoint
Karakomi Cameras Inc. has a Disposables Division that produces a
camera that sells for $15.00 per unit in the open market. The cost
of the product is $13.10 (variable manufacturing of $5.00, plus
fixed manufacturing of $8.10). Total fixed manufacturing costs are
$567,000 at the normal annual production volume of 70,000 units.
The Overseas Division has offered to buy 20,000 units at the full
cost of $13.10. The Disposables Division...

Transfer Prices at Full Cost with Excess Capacity:
Divisional Viewpoint
Karakomi Cameras Inc. has a Disposables Division that produces a
camera that sells for $15.00 per unit in the open market. The cost
of the product is $13.10 (variable manufacturing of $5.00, plus
fixed manufacturing of $8.10). Total fixed manufacturing costs are
$567,000 at the normal annual production volume of 70,000 units.
The Overseas Division has offered to buy 20,000 units at the full
cost of $13.10. The Disposables Division...

Transfer Prices at Full Cost with Excess Capacity:
Divisional Viewpoint Karakomi Cameras Inc. has a Disposables
Division that produces a camera that sells for $14.00 per unit in
the open market. The cost of the product is $11.30 (variable
manufacturing of $5.00, plus fixed manufacturing of $6.30). Total
fixed manufacturing costs are $441,000 at the normal annual
production volume of 70,000 units. The Overseas Division has
offered to buy 20,000 units at the full cost of $11.30. The
Disposables Division...

Negotiating a Transfer Price with Excess Capacity
The Foundry Division of Findlay Pumps Inc. produces metal parts
that are sold to the company's Assembly Division and to outside
customers. Operating data for the Foundry Division for 2017 are as
follows:
To the Assembly
Division
To Outside
Customers
Total
*Allocated on the basis of unit sales.
Sales
400,000 parts x $8.25
$3,300,000
300,000 parts x $8.60
$2,580,000
$5,880,000
Variables expenses at $5.00
(2,000,000)
(1,500,000)
(3,500,000)
Contribution margin
1,300,000
1,080,000
2,380,000
Fixed...

Dual Transfer Pricing
The Greek Company has two divisions, Beta and Gamma. Gamma Division
produces a product at a variable cost of $6 per unit, and sells
140,000 units to outside customers at $10 per unit and 40,000 units
to Beta Division at variable cost plus 40 percent. Under the dual
transfer price system, Beta Division pays only the variable cost
per unit. Gamma Division's fixed costs are $270,000 per year. Beta
Division sells its finished product to outside customers...

A camera company has enough capacity to produce 20,000 cameras
per year for mobile phones. This year it is producing 10,000
cameras and is planning to produce 15,000 next year. How would the
unit and total manufacturing costs change if this plan is
implemented, other things being equal?

A camera company has enough capacity to produce 20,000 cameras
per year for mobile phones. This year it is producing 10,000
cameras and is planning to produce 15,000 next year. How would the
unit and total manufacturing costs change if this plan is
implemented, other things being equal?

A firm has two divisions: a UP division and a DOWN division that
operate with autonomy. The UP division manufactures two different
products, one of which is transferred to the DOWN division within
the same company, and the other product is sold externally. The
external market price for the latter product is $120 per unit. The
transfer price for the internally transferred product is based on
its full cost in the UP division plus a markup of 20% over its...

The Colin Division of Mochrie Company sells its product for $37
per unit. Variable costs per unit are: manufacturing, $15; and
selling and administrative, $3. Fixed costs are: $320000
manufacturing overhead, and $50000 selling and administrative.
There was no beginning inventory. Expected sales for next year are
40000 units. Ryan Stiles, the manager of the Colin Division, is
under pressure to improve the performance of the Division. As he
plans for next year, he has to decide whether to produce...

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