Hitek, Inc. has 2 divisions, Diodes and Boards. The diode can be sold internally or externally. If sold externally, the sales price is $15 per diode. The Boards division needs 3 diodes for each electronic board it produces. The external sales prices and costs are: \[\begin{array} { l r r } & \text { Diodes } & \text { Boards } \\ \text { Sales price per unit } & \$ 15.00 & \$ 16.50 \\ \text { Variable costs (direct) per unit } & 6.00 & 9.00 \\ \text { Fixed costs per unit } & 3.00 & 6.00 \end{array}\] If the Diodes division can sell all of its production externally, what is the minimum price at which it would be willing to sell internally, and what is the maximum price the Board Division would be willing to pay? $\begin{array}{ll}\text { Diodes } & \text { Boards } \\ \text { Willing to Sell } &\text { Willing to Pay }\\ \text { a) } \$ 15 & \$ 2.50 \\ \text { b) } \$ 15 & \$ 7.50 \\ \text { c) } \$ 15 & \$ 15.00 \\ \text { d) } \$ 27 & \$ 27.00 \end{array}$

The answer of Hitek, Inc. has 2 divisions, Diodes and...

The Kelso Division produces and sells a product to external and internal customers. Per-unit information about its operations include: $\begin{array}{l} \begin{array}{lr} \text { Selling price per unit to external customers } & \$ 250 \\ \text { Variable manufacturing costs per unit } & 115 \\ \text { Fixed manufacturing overhead costs per unit } &70 \end{array}\\ \end{array}$ If Kelso is operating at capacity and has unlimited external customer demand, what should be the transfer price for Kelso's product?

A) $245 B) $250 C) $115 D) $185 A) $245 B) $250 C) $115 D) $185

The Machining Division is currently operating at capacity (2,000 units). Its sales and cost data are: \[\begin{array} { l r } \text { Selling price per unit } & \$ 100 \\ \text { Variable manufacturing costs per unit } & \$ 25 \\ \text { Variable administrative costs per unit } & \$ 5 \\ \text { Total fixed manufacturing overhead } & \$ 20,000 \\ \text { Total fixed administrative costs } & \$ 5,000 \end{array}\] If the Assembly Division is currently buying from an outside supplier at $98 per unit, what will be the effect on overall company profits if internal sales of 2000 units from Machining to Assembly take place at the optimum transfer price?

A) $7,000 increase B) $4,000 decrease C) $300 increase D) There is no effect A) $7,000 increase B) $4,000 decrease C) $300 increase D) There is no effect

The Kelso Division produces and sells a product to external and internal customers. Per-unit information about its operations include: $\begin{array}{l} \begin{array}{lr} \text { Selling price per unit to external customers } & \$ 250 \\ \text { Variable manufacturing costs per unit } & 115 \\ \text { Fixed manufacturing overhead costs per unit } &70 \end{array}\\ \end{array}$ If Kelso has sufficient excess capacity to meet internal demand, what should be the transfer price for Kelso's product?

A) $245 B) $250 C) $115 D) $185 A) $245 B) $250 C) $115 D) $185

Exam 14: Strategic Management of Costs

Hitek, Inc. has 2 divisions, Diodes and Boards. The diode can be sold internally or externally. If sold externally, the sales price is $15 per diode. The Boards division needs 3 diodes for each electronic board it produces. The external sales prices and costs are: Diodes Boards Sales price per unit \ 15.00 \ 16.50 Variable costs (direct) per unit 6.00 9.00 Fixed costs per unit 3.00 6.00 If the Diodes division can sell all of its production externally, what is the minimum price at which it would be willing to sell internally, and what is the maximum price the Board Division would be willing to pay? Diodes Boards Willing to Sell Willing to Pay a) \ 15 \ 2.50 b) \ 15 \ 7.50 c) \ 15 \ 15.00 d) \ 27 \ 27.00

(Short Answer)

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Question 101

The Kelso Division produces and sells a product to external and internal customers. Per-unit information about its operations include: Selling price per unit to external customers \ 250 Variable manufacturing costs per unit 115 Fixed manufacturing overhead costs per unit 70 If Kelso is operating at capacity and has unlimited external customer demand, what should be the transfer price for Kelso's product?

(Multiple Choice)

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Question 102

What is the best transfer price policy?

(Multiple Choice)

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Question 103

The Machining Division is currently operating at capacity (2,000 units). Its sales and cost data are: Selling price per unit \ 100 Variable manufacturing costs per unit \ 25 Variable administrative costs per unit \ 5 Total fixed manufacturing overhead \ 20,000 Total fixed administrative costs \ 5,000 If the Assembly Division is currently buying from an outside supplier at $98 per unit, what will be the effect on overall company profits if internal sales of 2000 units from Machining to Assembly take place at the optimum transfer price?

(Multiple Choice)

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Question 104

The Kelso Division produces and sells a product to external and internal customers. Per-unit information about its operations include: Selling price per unit to external customers \ 250 Variable manufacturing costs per unit 115 Fixed manufacturing overhead costs per unit 70 If Kelso has sufficient excess capacity to meet internal demand, what should be the transfer price for Kelso's product?

(Multiple Choice)

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Question 105

Transfer pricing policies can affect a company's tax liability, particularly if it does business internationally.

(True/False)

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Question 106

Which of the following is most likely to be the lowest transfer price?

(Multiple Choice)

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Question 107

Dual-rate transfer pricing systems are appropriate when the:

(Multiple Choice)

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Question 108

Changes in variable costs and changes in the product's demand sensitivity to price are the two factors that affect the profit-maximizing price.

(True/False)

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Question 109

In an economic downturn, a problem with cost-based pricing is a potential death spiral.

(True/False)

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Question 110

Division X sells organic high-gluten flour to Division Y. Division X incurs costs of $0.375 per kilogram of flour. Division Y makes loaves of bread that sell for $2.50 each. Division Y incurs costs of $1.25 per loaf, excluding the cost of flour. Each loaf of bread uses one-half kilogram of flour. What is the operating income per kilogram of flour for Division X if the transfer price is set at $0.625/kg?

(Multiple Choice)

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Question 111

Showing 101 - 111 of 111

What is the best transfer price policy?

Transfer pricing policies can affect a company's tax liability, particularly if it does business internationally.

Which of the following is most likely to be the lowest transfer price?

Dual-rate transfer pricing systems are appropriate when the:

Changes in variable costs and changes in the product's demand sensitivity to price are the two factors that affect the profit-maximizing price.

In an economic downturn, a problem with cost-based pricing is a potential death spiral.

The Role of Accounting Information in Ethical Management Decision Making

Cost Concepts, Behaviour, and Estimation

Cost-Volume-Profit Analysis

Relevant Information for Decision Making

Job Costing

Process Costing

Activity-Based Costing and Management

Measuring and Assigning Support Department Costs

Joint Product and By-Product Costing

Static and Flexible Budgets

Standard Costs and Variance Analysis

Strategic Investment Decisions

Pricing Decisions

Measuring and Assigning Costs for Income Statements

Performance Evaluation and Compensation

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