How much money would the company make

Assignment Help Finance Basics
Reference no: EM132548865

Suppose that a paper mill "feeds" a downstream box mill. For the downstream mill, the marginal profitability of producing boxes declines with volume. For example, the first unit of boxes increases earnings by $10, the second $9, the third $8, and so on, until the tenth unit increases profit by just $1. The cost the upstream mill incurs for producing enough paper to make one unit of boxes is $3.50.

a. If the two companies are separate profit centers, and the upstream paper mill sets a single transfer price (the price the box company pays the paper mill), what price will it set, and how much money will the company make?

b. If the paper mill were forced to transfer at marginal cost, how much money would the company make?

Reference no: EM132548865

Questions Cloud

How an industry with this particular market structure : Should government be worried about any aspect of how an industry with this particular market structure will perform?
Describe the main characteristics of the profit centres : Describe the main characteristics and objectives of the profit centres and investment centres. describe the main behavioural and control consequence
Compare the accounting and finance balance sheets : Explain why the book value of debt might not reflect the current cost of debt for the company.
Which is to be the result of buying the inferior materials : Which is to be the result of buying the inferior materials? The materials, Raw materials purchased had a lower price than the standard price.
How much money would the company make : If the paper mill were forced to transfer at marginal cost, how much money would the company make?
Which is false regarding normal costing systems : Which is false regarding normal costing systems? A normal costing system has less capacity for cost control and management than a standard costing system.
Which is false regarding variances : Which is false regarding variances? Favorable variances occur whenever actual prices or actual usage of inputs are lower than standard prices or standard usage.
Key macroeconomic variables : An abrupt house price crash sends shockwaves throughout the economy.
Determine the unit product cost for one gamelan : Ida Sidha Karya Company is a family- owned company,Assume that the company uses absorption Costing. Compute the unit product cost for one gamelan.

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the irr of the project

The management of Blue Thumb Tools believes the firm's current capital structure is optimal and intends to maintain it in the future.

  Majority of people and social institutions

1-2 pg essay that supports or opposes the following statement: In the year 2050, the majority of people and social institutions

  Common stockholders on the date of payment

How much will be distributed to the preferred and common stockholders on the date of payment if the preferred stock is $8,000 in arrears?

  Variance and standard deviation for number

What is the mean, variance and standard deviation for the number of successful surgeries?

  What is the standard deviation of a portfolio

What is the standard deviation of a portfolio consisting of equal proportions of A and B?

  Calculate the returns from the machine

Kenneth Su Gold Corp (KSGC) is considering the purchase of a new piece of machinery. The new machinery would cost $80,000. You are given the following facts:

  Expected rate of return and standard deviation for stocks

What is the expected rate of return and standard deviation for stocks?

  Consider the industrial supply company example

Consider the Industrial Supply Company example (Table 4.4) again. Assume that the company plans to maintain its dividend payments at the same level in 2011 as in 2010. Also assume that all of the additional financing needed is in the form of short..

  Cloud-based software to promote and run a business

Could you please tell me some ethical considerations when using social media and cloud-based software to promote and run a business.

  Organizational characteristics of nonprofit-for-profit

Write a 350- to 700-word paper in which you contrast nonprofit and for-profit businesses. Include the following points: Organizational characteristics of nonprofit and for-profit organizations

  Quantify the elements of working capital

Describe and quantify the elements of working capital for the 2006 fiscal year for both the Walt Disney Company and Apple. Explain the functions of intermediaries and financial regulatory bodies within the companies.

  Calculation of current price of the bond

Calculation of current price of the bond and its yield to maturity is 10 percent with semiannual compounding

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd