Exam 13: Responsibility Accounting,support Department Allocations,and Transfer Pricing

Office Systems Corporation Office Systems Corporation manufactures and sells various high-tech office automation products.Two divisions of Office Systems Corporation are the Computer Chip Division and the Computer Division.The Computer Chip Division manufactures one product,a "super chip," that can be used by both the Computer Division and other external customers.The following information is available on this month's operations in the Computer Chip Division: Selling price per chip \5 0 Variable costs per chip \2 0 Fixed production costs \ 60,000 Fixed SG\&A costs \ 90,000 Monthly capacity 10,000 chip External sales 6,000 chip Internal sales 0 chip Presently,the Computer Division purchases no chips from the Computer Chips Division,but instead pays $45 to an external supplier for the 4,000 chips it needs each month. Refer to Office Systems Corporation.Assume that next month's costs and levels of operations in the Computer and Computer Chip Divisions are similar to this month.What is the minimum of the transfer price range for a possible transfer of the super chip from one division to the other?

Negotiated transfer prices are most appropriate for low cost and low volume services.

Crosby Corporation Crosby Corporation has two service departments: Data Processing and Administration/Personnel.The company also has three divisions: X,Y,and Z.Data Processing costs are allocated based on hours of use and Administration/Personnel costs are allocated based on number of employees. Administration /Personnel \ 400,000 10 3,300 Data Processing 850,000 5 1,100 X 450,000 30 1,800 Y 300,000 15 2,200 Z 550.000 25 4,500 Assume that Data Processing provides more service than Administration/Personnel. Refer to Crosby Corporation.Assume that Data Processing costs have been allocated and the balance in Administration is $600,000.Using the step method,what amount is allocated to X?

Lincoln Corporation Lincoln Corporation distributes its service department overhead costs directly to producing departments without allocation to the other service departments.Information for January is presented here.                                                      $\text {\underline{ Mantenance} }$   $\text {\underline{ Utilities} }$ Overhead costsincurred \ 18,700 \ 9,000 Service provided to: Maintenance Dept. 10\% Utilities Dept. 20\% Producing Dept. A 40\% 30\% Producing Dept. B 40\% 60\% Refer to Lincoln Corporation.The amount of Utilities Department costs distributed to Dept.B for January should be (rounded to the nearest dollar)

Which of the following is a consistently desirable characteristic in a transfer pricing system?

Decentralization means that a unit manager has the authority to make all decisions concerning that specific unit.

All of the following objectives are reasons to allocate service department costs to compute full cost except to

The manager of a profit center has the ability to set selling prices.

The manager of an investment center is responsible for generating revenue as well as controlling expenses.

Corporate taxes and tariffs are particular transfer-pricing concerns of

Which of the following methods of assigning indirect service department costs recognizes on a partial basis the reciprocal relationships among the departments?

External factors considered in setting transfer prices in multinational firms typically do not include

In an internal transfer,the selling division records the event by crediting

A responsibility accounting system should include all revenues and costs of a division.

Three types of transfer prices are _________________________,_________________________,and ____________________.

Which of the following is a reason for allocating service department costs and thereby motivating management?

Seminole Wire Corporation The Wire Products Division of Seminole Wire Corporation produces "bales" of steel wire that are used in various commercial applications.The bales sell for an average of $20 each and The Wire Products Division has the capacity to produce 10,000 bales per month.The Consumer Products Division of Seminole Wire Corporation uses approximately 2,000 bales of steel wire each month in its production of various appliances.The operating information for the Wire Products Division at its present level of operations (8,000 bales per month)follows: Sales (all external)                                          $\$ 160,000$ Variable costs per bale: Production                                                       $\$ 5$ Selling                                                             2 G\&A                                                               3 Fixed costs per bale (based on a 10,000 urit capacity): Production                                                     $\$ 2$ Selling                                                            3 $\mathrm{Ct} \& \mathrm{~A}$                                                           4 The Consumer Products Division currently pays $15 per bale for wire obtained from its external supplier. Refer to Seminole Wire Corporation.If 2,000 bales are transferred in one month to the Consumer Products Division at $10 per bale,what would be the profit/loss of the Wire Products Division? Assume that only variable production will be incurred by the Wire Products Division.

A rational and systematic allocation base for service department costs should reflect the cost accountant's consideration of all of the following except

Which service department cost allocation method utilizes a "benefits-provided" ranking?

Seminole Wire Corporation The Wire Products Division of Seminole Wire Corporation produces "bales" of steel wire that are used in various commercial applications.The bales sell for an average of $20 each and The Wire Products Division has the capacity to produce 10,000 bales per month.The Consumer Products Division of Seminole Wire Corporation uses approximately 2,000 bales of steel wire each month in its production of various appliances.The operating information for the Wire Products Division at its present level of operations (8,000 bales per month)follows: Sales (all external)                                          $\$ 160,000$ Variable costs per bale: Production                                                       $\$ 5$ Selling                                                             2 G\&A                                                               3 Fixed costs per bale (based on a 10,000 urit capacity): Production                                                     $\$ 2$ Selling                                                            3 $\mathrm{Ct} \& \mathrm{~A}$                                                           4 The Consumer Products Division currently pays $15 per bale for wire obtained from its external supplier. Refer to Seminole Wire Corporation.If the Consumer Products Division agrees to pay the Wire Products Division $16 per bale for 2,000 bales this month,what would be Consumer's change in total profits?