Reference no: EM133090761
Question - Amazon Beverages produces and bottles a line of soft drinks using exotic fruits from Latin America and Asia. The manufacturing process entails mixing and adding juices and coloring ingredients at the bottling plant, which is a part of Mixing Division. The finished product is packaged in a company-produced glass bottle and packed in cases of 24 bottles each.
Because the appearance of the bottle heavily influences sales volume, Amazon developed a unique bottle production process at the company's container plant, which is a part of Container Division. Mixing Division uses all of the container plant's production. Each division (Mixing and Container) is considered a separate profit center and evaluated as such. As the new corporate controller, you are responsible for determining the proper transfer price to use for the bottles produced for Mixing Division.
At your request, Container Division's general manager asked other bottle manufacturers to quote a price for the number and sizes demanded by Mixing Division. These competitive prices follow.
|
Volume
|
Total Price
|
Price per Case
|
|
500,000 equivalent casesa
|
$4,100,000
|
$8.20
|
|
1,000,000
|
7,200,000
|
7.20
|
|
1,500,000
|
9,600,000
|
6.40
|
a An equivalent case represents 24 bottles.
Container Division's cost analysis indicates that it can produce bottles at these costs.
|
Volume
|
Total Cost
|
Cost per Case
|
|
500,000 equivalent cases
|
$3,400,000
|
$6.80
|
|
1,000,000
|
5,900,000
|
5.90
|
|
1,500,000
|
8,400,000
|
5.60
|
These costs include fixed costs of $900,000 and variable costs of $5.00 per equivalent case. These data have caused considerable corporate discussion as to the proper price to use in the transfer of bottles from Container Division to Mixing Division. This interest is heightened because a significant portion of a division manager's income is an incentive bonus based on profit center results.
Mixing Division has the following costs in addition to the bottle costs.
|
Volume
|
Total Cost
|
Cost per Case
|
|
500,000 equivalent cases
|
$1,900,000
|
$3.80
|
|
1,000,000
|
2,700,000
|
2.70
|
|
1,500,000
|
3,500,000
|
2.33
|
The corporate marketing group has furnished the following price-demand relationship for the finished product:
|
Sales Volume
|
Total Sales Revenue
|
Sales Price per Case
|
|
500,000 equivalent cases
|
$10,500,000
|
$21.00
|
|
1,000,000
|
19,000,000
|
19.00
|
|
1,500,000
|
24,000,000
|
16.00
|
Required -
a. Amazon Beverages has used market price-based transfer prices in the past. Using the current market prices and costs and assuming a volume of 1.50 million cases. Calculate operating profits for Container Division, Mixing Division, Amazon Beverages.
b-1. Calculate operating profits for Container, Mixing and Amazon Beverages for volumes of 500,000, 1,000,000 and 1,500,000 cases.
b-2. Which volume of production is the most profitable for Container, Mixing and Amazon Beverages?
|
Gesture to default posture in approach
: The concepts of "gesture" (temporary position) and "posture" (permanent stance) are helpful tools to assess the contemporary Church's approach to change culture
|
|
What is the annual carrying cost
: Adam has a company that uses 350,000 of units of a component for the production line per year. The ordering cost of the component is $24 per order and the carry
|
|
Explain the everyday interaction with brands
: Using Ch. 9 in the Carah and Louw (2015) text as a base for your response, discuss and explain the ways that brands are activated at social-commercial events su
|
|
Russian citizens to facilities in russia
: Stockmann, a Finnish company, is planning to transfer internal data records on Russian citizens to facilities in Russia. The action is necessary for Stockmann n
|
|
Calculate operating profits for Container and Mixing
: Calculate operating profits for Container, Mixing and Amazon Beverages for volumes of 500,000, 1,000,000 and 1,500,000 cases
|
|
Professional social networking platform
: In your initial post, address the following: Identify three things that describe your personal brand.
|
|
Identify potential threats
: Use VAM to discover vulnerabilities in the assets identified previously. Use the VAM table to display the findings.
|
|
Business by the internet of things
: Apply the value chain and/or virtual value chain to analyse how value is created and delivered in your business by the Internet of Things
|
|
Investor expectations of earning
: Based on the investor expectations of earningat least 12%, should this project below be completed?
|