Compute the effect on firm-wide income if 40000 components

Assignment Help Accounting Basics

Reference no: EM13602738

The Adam Division produces a component that is used by the West Division. The cost of manufacturing the component is as follows:

Direct materials $30
Direct labor 8
Variable overhead 10
Fixed overheada 12
Total cost $60

a Based on a practical volume of 250,000 components

Other costs incurred by the Adam Division are as follows:
Fixed selling and administrative $1,200,000
Variable selling $4 per unit

The component usually sells for $90 in the external market. The Adam Division is capable of producing 250,000 components per year; however, only 200,000 components are expected to be sold next year. The variable selling expenses are avoidable if the component is sold internally.

The West Division has been buying the same component from an external supplier for $80 each. The West Division expects to use 40,000 units of the component next year. The manager of the West Division has offered to buy 40,000 units from the Adam Division for $56 each.

Required:

1. Compute the effect on firm-wide income if 40,000 components are transferred internally at $56 each instead of purchased from an external supplier at $80 per unit.

Reference no: EM13602738

Questions Cloud

Compute the projected costs and the overhead rate for this : lund products inc. uses a predetermined overhead rate in its production assembly and testing departments. one rate is

The andrew jackson corporation a manufacturer of the : the andrew jackson corporation a manufacturer of the hickory walking sticks made of hickory gathered the following

If the liabilities of a company increased 92000 during a : if the liabilities of a company increased 92000 during a period of time and equity in the business decreased 30000

The new equipment will cost 1000000 will provide annual : abc inc. is considering investing in new equipment for the manufacture of blue ink. the new equipment will cost 1000000

Compute the effect on firm-wide income if 40000 components : the adam division produces a component that is used by the west division. the cost of manufacturing the component is as

Nordstrom company reported net income of 195000 for 2011 : nordstrom company reported net income of 195000 for 2011. nordstrom also reported depreciation expense of 45000 and a

A firm has consistently adjusted its allowance account at : a firm has consistently adjusted its allowance account at the end of the fiscal year by adding a fixed percent of the

On some jobs it is necessary to use outside experts for : emily estimated that she will need to spend 16 hours each month on business development and networking 40 hours per

Build a spreadsheet construct an excel spreadsheet to solve : 70 percent collected in the month of sales15 percent collected in the first month after sale10 percent collected in the

User Account

All Pages