User Account

All Pages

Differential analysis, Cost Accounting

Assignment Help:
West Industries is a highly decentralized corporation with independent operating divisions.
Each division is evaluated and rewarded based on its total net income. One of the divisions,
Visic, manufactures and sells air conditioners. Visic is projecting sales of 17,400 for next year.
Another division, Weber, makes and sells compressors. Its projected income statement for
next year follows:
Weber Division
Pro forma income statement
For next year
Per unit Total
Sales revenues $100 $ 6,400,000
Less cost of goods sold:
Direct materials 12 768,000
Direct labour 8 512,000
Variable overhead 10 640,000
Fixed overhead 11 704,000
41 2,624,000
Gross profit 59 3,776,000
Operating expenses:
Variable selling expenses 6 384,000
Fixed selling expenses 4 256,000
Fixed administrative expenses 7 448,000
17 1,088,000
Pre-tax net income $ 42 $ 2,688,000
Weber has the capacity to produce 75,000 compressors annually. Visic currently purchases
compressors from an outside source at $70, and proposes that Weber transfer compressors to
it at a transfer price of $50. The Visic manager justified the low bid based on some cost
savings that should be realized if compressors are transferred. Because specifications for this
compressor are slightly different from Weber’s standard model, $1.50 of direct materials cost
per compressor can be saved and no variable selling expenses will be incurred on
compressors transferred.
Required:
a) Compute the minimum transfer price Weber should accept.
b) Compute the estimated effect on Weber’s net income if the 17,400 compressors are
transferred at $50 each.
c) Determine whether it would be in West Industries’ best interest for Weber to transfer
compressors at $50 each.

Related Discussions:- Differential analysis

Uses of funds, Dividends                                                   ...

Dividends                                                                                        ................ Non-operating losses not passed through P and L A/c

What are the values for cogs, Given the below information, what are the val...

Given the below information, what are the values for COGS and ending inventory for each costing method below?   Number of Units Price per Unit

Estimate the required rate of return, a)     Company X is expected to maint...

a)     Company X is expected to maintain a constant 7% growth rate in their dividends, indefinitely. If the company has a dividend yield of 4%, what is the required return on their

Time rate system - labour remuneration, Time Rate System - Labour Remunerat...

Time Rate System - Labour Remuneration It may be a high day rate or a flat time rate. Under flat time rate, all worker is paid for the time spend without considering the vol

Jobwork, elements for jobwork COST SHEET

elements for jobwork COST SHEET

Functional classification of costs, Functional Classification of Costs ...

Functional Classification of Costs Beneath this classification, costs are classified according to the function they execute in an organization.  Costs can functionally be clas

Assignment Choice #2: Accounting for Byproducts (Quantitativ, Pyramid Print...

Pyramid Printing Company is a printer of magazines and retail inserts. In addition, there are two joint products (food wrapping and book covers) and one byproduct (shipping-box ins

Manufacturing a/c, value of which items are required to be put in a simple...

value of which items are required to be put in a simple format of manufacturing a/c.

Mr., behabioural aspect of standard costing on budget

behabioural aspect of standard costing on budget

Cvp analysis in situations subject to change, CVP Analysis in Situations Su...

CVP Analysis in Situations Subject To Change Revenue and Cost will change and also sales volume because of a number of factors involving: a) Increased competition may need

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

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: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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