Reference no: EM133017006
Question - Slagle Corporation is a large manufacturing organization. Over the past several years, it has obtained an important component used in its production process exclusively from Harrison, Inc., a relatively small company in Topeka, Kansas. Harrison charges $90 per unit for this part:
Variable cost per unit $40
Fixed cost assigned per unit 30
Markup 20
Total price $90
In hope of reducing manufacturing costs, Slagle purchases all of Harrison's outstanding common stock. This new subsidiary continues to sell merchandise to a number of outside customers as well as to Slagle. Thus, for internal reporting purposes, Slagle views Harrison as a separate profit center.
A controversy has now arisen among company officials about the amount that Harrison should charge Slagle for each component. The administrator in charge of the subsidiary wants to continue the $90 price. He believes this figure best reflects the division's profitability: "If we are to be judged by our profits, why should we be punished for selling to our own parent company? If that occurs, my figures will look better if I forget Slagle as a customer and try to market my goods solely to outsiders."
In contrast, the vice president in charge of Slagle's production wants the price set at variable cost, total cost, or some derivative of these numbers. "We bought Harrison to bring our costs down. It only makes sense to reduce the transfer price; otherwise the benefits of acquiring this subsidiary are not apparent. I pushed the company to buy Harrison; if our operating results are not improved, I will get the blame."
Will the decision about the transfer price affect consolidated net income? Which method would be easiest for the company's accountant to administer? As the company's accountant, what advice would you give to these officials?
Describe the internal and external environment of apple inc
: Describe the internal and external environment of Apple Inc. Corporate
|
What is the passive voice
: What is the passive voice? How does it help?
|
Profound implications for matter
: It is sometimes advantageous to analyze light as though it is a wave. At other times, it is better to analyze light as though it is made up of particles. Even t
|
Didi ceo cheng wei sates that globalization
: Didi's CEO Cheng Wei sates that globalization is a top strategic priority for the organization. Explain how Didi is utilizing major developments in globalizatio
|
Which method would be easiest for the company
: Will the decision about the transfer price affect consolidated net income? Which method would be easiest for the company's accountant to administer
|
Discuss bad queries and bad table data in your analysis
: For this assignment, continue to assume the role of a data analyst at Adventure Works Cycling Company. As you work to address the business problem surrounding s
|
Management of business processes
: Should smaller companies be concerned about the management of business processes, in light of the fact that they are typically NOT ERP users? Explain.
|
What is the npv of this project
: The gallery expects to bring in additional cash flows of $520,000, $700,000, and $1,000,000 over the next three years. What is the NPV of this project
|
What is the wacc
: The cost of debt is 3.50%, the cost of common stock is 15%, and the tax rate is 30%. What is the WACC
|