ACCOUNTING Ex 24-21 Based on Crow Manufacturing\'s data in Exercise 24-20, assum

Question

ACCOUNTING Ex 24-21 Based on Crow Manufacturing's data in Exercise 24-20, assume that a transfer price of $110 has been established and that 40,000 units of materials are transferred, with no reduction in the Materials Division's current sales. a) How much would the Crow Manufacturing's total income from operations increase? b) How much would the Industrial Division's income from operations increase? c) How much would the Materials Division's income from operations increase? d) If the negotiated price approach is used, what would be the range of acceptable transfer prices and why?

Explanation / Answer

Case1 When Transfer price = $ 105 (a) Total profit = (120 - 95) * 40000 = $ 1,000,000 (b) Profit of Industrial Division = (120 - 105) * 40000 = $ 600,000 (c) Profit of Material Division = (105 - 95) * 40000 = $ 400,000 Case1 When Transfer price = $ 110 (a) Total profit = (120 - 95) * 40000 = $ 1,000,000 (b) Profit of Industrial Division = (120 - 110) * 40000 = $ 400,000 (c) Profit of Material Division = (110 - 95) * 40000 = $ 600,000 (d) Transfer price can vary from $ 95 to $ 120

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.