User Account

All Pages

What is the maximum price

Assignment Help Managerial Accounting
Reference no: EM132993345

Question - LG Electronics Ltd operates as a decentralised multidivisional company. The Electronic Division of LG Electronics Ltd manufactures smart televisions, each of which requires one square metre of special integrated circuit boards. The Electronic division can purchase this material from an external supplier at $100 plus a $5 inspection cost per square metre. Alternatively, it could purchase this material internally from the Assembly Division of LG Electronics Ltd.

The Assembly Division's incremental (variable) cost for manufacturing one square metre of special integrated circuit boards needed per television is $80. The Assembly Division is currently operating at 60% of its capacity of 20,000 square metres per month. It currently sells one square metre of special integrated circuit boards to external customers at $90 per square metre.

The Electronic Division will initially manufacture 7,500 smart television units per month.

REQUIRED -

A) What is the minimum price at which the Assembly Division of LG Electronics Ltd would be willing to sell one square metre of special integrated circuit boards to the Electronic Division of LG Electronics Ltd?

B) Suppose that the Electronic division's manufacturing plans increase to 12,500 units per month. Would this alter the minimum price at which the Assembly Division would be willing to sell each square metre of special integrated circuit boards to the Electronic Division?

C) What is the maximum price that the Electronic Division would be willing to pay to the Assembly Division for one square metre of special integrated circuit boards?

D) Now assume that a new external supplier offers to sell the special integrated circuit boards to the Electronic Division at a price of $78 (plus there will still be an inspection cost of $5). From the point of view of LG Electronics Ltd as a whole, how much of the 12,500 units required by the Electronic Division should be transferred by the Assembly Division? Which transfer pricing policy will guarantee this outcome? Briefly explain.

Reference no: EM132993345

Questions Cloud

What is the annual operating cash flow for the worst-case : You feel that both sales and costs are accurate to +/-15 percent. The tax rate is 40 percent. What is the annual operating cash flow for the worst-case scenario
What is the nominal interest rate : Suppose the real interest rate is 8 percent and the expected inflation rate is 3 percent.
What is the maximum the division will pay : What is the maximum the Division will pay the Assembly Div for a square metre of special integrated circuit boards
Which due diligence is often performed by all of parties : Which Due diligence is most often performed by all of the parties to the transaction except for? Which Due diligence works most in the favor of
What is the maximum price : What is the maximum price that Electronic Division would be willing to pay to the Assembly Division for one square metre of special integrated circuit boards
Which is an important factor in determining profitability : Which is an important factor in determining profitability and cash flow in an industry or market? Which organization introduced the concept of Cost Leadership?
How much safety stock should the sydney warehouse hold : Geox Ltd has determined that demand may vary from the average by up to 25%. How much safety stock should the Sydney warehouse hold
How can demographic market data influence health care : How can demographic market data influence health care business decisions? Provide details
Compute earnings per share for concord company : Compute earnings per share for 2020. Assume that financial statements for 2020 were issued in March 2021. At January 1, 2020, Concord Company outstanding share.

Reviews

Write a Review

Managerial Accounting Questions & Answers

  Relevant cost-product planning-calculate operating profit

Find out the current operatng profit for the company as whole? Supposing that all fixed cost are unavoidable, if company eliminated the unprofitable segments, what would be the new operating profit for the company as a whole be?

  Determine if the financial statements are correct

Determine if the financial statements are correct and in accordance with generally accepted accounting principles, but not to determine if there is compliance

  What amount will bmw report cost of goods sold

Rawan produced 60,000 products but only sold 54,000. At what amount will BMW report its cost of goods sold for this first year for external reporting purposes?

  What is the total sales mix variance

During latest quarter, 8,050 hours were actually billed out, with design work for printed media taking up 15% of all billings. What is total sales mix variance

  What would be the amount of custodial cost allocated

Using the step-down method of allocation, what would be the amount of Custodial's cost allocated to the Assembly Department?

  Which company will tend to realize the greatest increase

Are mostly variable, whereas Company B's costs are mostly fixed. When sales increase, which company will tend to realize the greatest increase?

  Journalize the summary transactions for the period

Journalize the summary transactions (1)-(4) for the period.Vintage Audio Inc. manufactures audio speakers. Each speaker requires $48 per unit

  What the effective annual opportunity cost of paying monthly

What The effective annual opportunity cost of paying monthly as a percentage to two decimal places is?Mooncorp Insurance has quoted you an annual premium

  Which is not a benefit of activity-based costing

Which is NOT a benefit of activity-based costing? improves the accuracy of costs assigned to cost objects. / improves the ability to estimate costs.

  What the net present value of this project

The new system is expected to generate net cash inflows of $9,000 per year in each of the 5 years. What the net present value of this project

  What were the actual total sales revenues for the period

Fixed costs $900,000 Contribution margin ratio was 25%. The break-even 12,000 units. What were the actual total sales revenues for the period?

  Prepare a flexible budget for that level of activity

During March, the company's activity was actually 190 diving-hours. Prepare a flexible budget for that level of activity.

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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