Question

Rapid Industries has multiple divisions. One division, Iron Products, makes a component that another division, Austin,...

Rapid Industries has multiple divisions. One division, Iron Products, makes a component that another division, Austin, is currently purchasing on the open market. Iron Products currently has a capacity to produce 515,000 components at a variable cost of $7.00 and a full cost of $9.00. Iron Products has outside sales of 477,000 components at a price of $13.00 per unit. Austin currently purchases 50,000 units from an outside supplier at a price of $11.00 per unit. Assume that Austin desires to use a single supplier for its component.

a. What will be the effect on Rapid Industries’ operating profit if the transfer is made internally? Assume the 50,000 units Austin needs are either purchased 100% internally or 100% externally.



b. What is the minimum transfer price? (Round your answer to 2 decimal places.)



c. What is the maximum transfer price? (Round your answer to 2 decimal places.)

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The answer has been presenetd in the supporting sheet.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Giga-Stuff, Inc. has a number of divisions. One division, Sophistosand, makes a component, component X, that...
Giga-Stuff, Inc. has a number of divisions. One division, Sophistosand, makes a component, component X, that is used in the manufacture of CD players. Another division, Videostuff, makes DVD players that use component X adn needs 60,000 units of component X per year. Sophistosand incurs the following costs for one unit of component X: Direct Materials: $0.30 Direct Labor: $0.15 Variable OH: $0.70 Fixed OH: $1.00 Sophistosand has capacity to make 400,000 units of component X per year, but due...
Freight industries has several divisions. The Eastern Division can produce 3,000 units of product X at...
Freight industries has several divisions. The Eastern Division can produce 3,000 units of product X at the following costs: $75/unit variable costs and $70/unit fixed costs. Eastern sells units of X in the outside market for $180/unit. The Canadian Division can use product X in its manufacturing process. If Canadian spends $80 of variable cost per unit to process X further, it can sell the resulting product Y for $200/unit. Canadian can acquire product X from an outside supplier for...
Freight industries has several divisions. The Eastern Division can produce 3,000 units of product X at...
Freight industries has several divisions. The Eastern Division can produce 3,000 units of product X at the following costs: $75/unit variable costs and $70/unit fixed costs. Eastern sells units of X in the outside market for $180/unit. The Canadian Division can use product X in its manufacturing process. If Canadian spends $80 of variable cost per unit to process X further, it can sell the resulting product Y for $200/unit. Canadian can acquire product X from an outside supplier for...
Bostonian Inc. has a number of divisions, including Delta Division and ListenNow Division. The ListenNow Division...
Bostonian Inc. has a number of divisions, including Delta Division and ListenNow Division. The ListenNow Division owns and operates a line of MP3 players. Each year the ListenNow Division purchases component AZ in order to manufacture the MP3 players. Currently it purchases this component from an outside supplier for $6.50 per component. The manager of the Delta Division has approached the manager of the ListenNow Division about selling component AZ to the ListenNow Division. The full product cost of component...
Germano Products, Inc., has a Pump Division that manufactures and sells a number of products, including...
Germano Products, Inc., has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below: Capacity in units 50,000 Selling price to outside customers $ 63 Variable cost per unit $ 22 Fixed cost per unit (based on capacity) $ 24 The Pool Products Division is currently purchasing 9,000 of these...
Gutierrez Company makes various electronic products. The company is divided into a number of autonomous divisions...
Gutierrez Company makes various electronic products. The company is divided into a number of autonomous divisions that can either sell to internal units or sell externally. All divisions are located in buildings on the same piece of property. The Board Division has offered the Chip Division $22 per unit to supply it with chips for 41,000 boards. It has been purchasing these chips for $23 per unit from outside suppliers. The Chip Division receives $24.20 per unit for sales made...
Germano Products, Inc., has a Pump Division that manufactures and sells a number of products, including...
Germano Products, Inc., has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below: Capacity in units 75,000 Selling price to outside customers $ 81 Variable cost per unit $ 28 Fixed cost per unit (based on capacity) $ 33 The Pool Products Division is currently purchasing 18,000 of these...
Pips Products, Inc., has a Receiver Division that manufactures and sells a number of products, including...
Pips Products, Inc., has a Receiver Division that manufactures and sells a number of products, including a standard receiver that could be used by another division in the company, the Industrial Products Division, in one of its products. Data concerning that receiver appear below: Capacity in units 10,000 Selling price to outside customers $ 89 Variable cost per unit $ 35 Fixed cost per unit (based on capacity) $ 42 The Industrial Products Division is currently purchasing 10,000 of these...
15. Vaughn Manufacturing manufactures and sells high-priced motorcycles. The Engine Division produces and sells engines to...
15. Vaughn Manufacturing manufactures and sells high-priced motorcycles. The Engine Division produces and sells engines to other motorcycle companies and internally to the Production Division. It has been decided that the Engine Division will sell 18000 units to the Production Division at 1050 a unit. The Engine Division, currently operating at capacity, has a unit sales price of $2050 and unit variable costs and fixed costs of $1050 and $1000, respectively. The Production Division is currently paying $1900 per unit...
The Can Division of Waterway Industries manufactures and sells tin cans externally for $1.50 per can....
The Can Division of Waterway Industries manufactures and sells tin cans externally for $1.50 per can. Its unit variable costs and unit fixed costs are $0.24 and $0.13, respectively. The Packaging Division wants to purchase 50,000 cans at $0.37 a can. Selling internally will save $0.05 a can. Assuming the Can Division has sufficient capacity, what is the minimum transfer price it should accept?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT