Acc 349
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
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