Reference no: EM133158556
Question - Keepit Corporation has two divisions: Ottawa and Cornwall. Ottawa currently sells a condenser to manufacturers of cooling systems for $520 per unit. Variable costs amount to $380, and demand for this product currently exceeds the division's ability to supply the marketplace.
Keepit is considering another use for the condenser, namely, integration into an enhanced refrigeration system that would be made by Cornwall. Related information about the enhanced system follows.
Selling price of refrigeration system: $1,285
Additional variable manufacturing costs required: $820
Transfer price of condenser: $490
Top management is anxious to introduce the enhanced system; however, unless the transfer is made, an introduction will not be possible because of the difficulty of obtaining condensers in the quality and quantity desired. The company uses responsibility accounting and ROI when measuring divisional performance, and awards bonuses to divisional management.
Required -
a) How would Ottawa's divisional manager likely react to the decision to transfer condensers to Cornwall? Show computations to support your answer.
b) How would Cornwall's divisional management likely react to the $490 transfer price? Show computations to support your answer.
c) From a contribution margin perspective, does Keepit benefit more if it sells the condensers externally or transfers the condensers to Cornwall? By how much?
|
How can you apply communication
: How can you apply communication, problem solving, and innovation to your personal, professional, and academic life?
|
|
What will be anne beginning capital balance
: Anne is going to invest $93,000 into the business to acquire a 30 percent ownership interest. What will be Anne beginning capital balance
|
|
How the skills contribute to persuasive writing
: How can you apply communication, problem solving, and innovation to your personal, professional, and academic life?
|
|
Case study-carter cleaning centers
: 1. Draw up a policy statement regarding vacations, sick leave, and paid days off for Carter Cleaning Centers.
|
|
How would cornwall divisional management likely react
: How would Cornwall's divisional management likely react to the $490 transfer price? Show computations to support your answer
|
|
What decisions would you suggest regarding raises for teller
: 1. If you were on the HR committee of State Bank, what decisions would you suggest regarding raises for the tellers?
|
|
Develop a complete swot analysis for poultry farm
: Develop a complete SWOT analysis for Poultry Farm. The analysis should include all items in each category with an Example: strengths, weaknesses, opportunities,
|
|
What is budgeted sales for next year
: Marketing believes that next year sales volume will increase by 6% and average selling prices will increase by 4%. What is budgeted sales for next year
|
|
Have diversity awareness programs in organization
: Have diversity awareness programs in your organization been successful? If so, what changes have you seen? If not, what do you think is preventing it? If you ha
|