# Acc 349

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Individual Assignment
Juliana Cardoso
ACC 349
April 17, 2012
Dr. Armando Salas- Amaro

Individual Assignment
Ch. 8

E8-11 Allied Company’s Small Motor Division manufactures a number of small motors used in household and office appliances. The Household Division of Allied then assembles and packages such items as blenders and juicers. Both divisions are free to buy and sell any of their components internally or externally. The following costs relate to small motor LN233 on a per unit basis.

Fixed cost per unit \$ 5
Variable cost per unit 8
Selling price per unit 30
Instructions

(a) Assuming that the Small Motor Division has excess capacity, compute the minimum acceptable price for the transfer of small motor LN233 to the Household Division.

Variable cost + opportunity cost = minimum transfer price \$ 8 + \$ 0 = \$ 8

(b) Assuming that the Small Motor Division does not have excess capacity, compute the minimum acceptable price for the transfer of the small motor to the Household Division.

Variable cost + opportunity cost = minimum transfer price \$ 8 + \$ 22 = \$ 30

(c) Explain why the level of capacity in the Small Motor Division has an effect on the transfer price.

At the excess capacity the company could sell its products at relatively low price, since it has excess capacity so that it can cover its costs by producing in bulk. But in case of no excess capacity the company has to sell its products at the price that covers the variable cost as well as contribution margin.

Ch. 9

BE9-6 For Savage Inc. variable manufacturing overhead costs are expected to be \$20,000 in the first quarter of 2005 with \$2,000 increments in each of the remaining three quarters. Fixed overhead costs are estimated to be \$35,000 in each quarter. Prepare the manufacturing overhead budget by quarters and in total for the year.

SAVAGE INC.
For the Year Ending December 31, 2005

| | Quarter| | |
| | | | | | | | | | |
| | 1| | 2| | 3| | 4| | Year|
| | | | | | | | | | |
Variable costsFixed costsTotal manufacturing overhead| | \$20,000 35,000\$55,000| | \$22,000 35,000\$57,000| | \$24,000 35,000\$59,000| | \$26,000 35,000\$61,000| | \$ 92,000 140,000\$232,000|

BE9-8 Stoker Company has completed all of its operating budgets. The sales budget for the year shows 50,000 units and total sales of \$2,000,000. The total unit cost of making one unit of sales is \$24. Selling and administrative expenses are expected to be \$300,000. Income taxes are estimated to be \$150,000. Prepare a budgeted income statement for the year ending December 31, 2005.

STOKER COMPANY
Budgeted Income Statement
For the Year Ending December 31, 2005

Sales\$2,000,000
Cost of goods sold (50,000 X \$24) 1,200,000
Gross profit   800,000