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kirill115 [55]
3 years ago
6

Fois Company has two divisions, Division X and Division Y. Division X has a production capacity of 5,000 units of a particular p

art per month. Division X sells 4,400 units of the part each month to outside customers at a contribution margin of $56 per unit. Division Y would like to buy 800 units of the part each month from Division X. In computing the lowest acceptable transfer price from the perspective of the selling division, the lost contribution margin per unit portion of the transfer price computation would be:
Business
1 answer:
kogti [31]3 years ago
8 0

Answer:

Lost contribution per unit = $56 per unit

Explanation:

The Division X is operating at less than full capacity, hence it has excess capacity   of  600 units i.e (5000- 4,400)

This implies that it can only produce to meet the external and a portion of  Division Y demand  

Since Division X can only accommodate a portion of the internal demand, an opportunity would arise if it decides to meet all the request of Division Y.

Therefore, the minimum transfer price

minimum transfer price= Variable cost + a lost contribution from internal supply

The lost contribution represent the amount Division X would have made had sold the units to external buyers

Lost contribution per unit = $56 per unit

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On January 5, 2020, Sheffield Corporation received a charter granting the right to issue 5,100 shares of $100 par value, 7% cumu
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Answer:

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Journal Entries

Date             Description                              DR                           CR

Jan 11         Cash                                       292,500

                 Common stock                                                     195,000

                 Paid in Capital for common stock                         97,500

               

              <em>Being the amount received on issue of </em>

<em>              </em>

Feb 11     Equipment                                   53,300

              Factory Building                          152,000

              Land                                             295,000

             Prefereed stock                                                     410,000

             Paid -in -capital for Preferred stock                        90,300

July 29   Treasury stock                              25,600

              Cash                                                                            25,600

            Being the payment of own share purchased

Aug 10    Cash                                                   22,400

                Retained Earnings                               3,200

               Treasury stock                                                      25,600

 

Dec 31       Retained  earnings                              10,025

                 Dividend(0.35*19500)                                            6,825  

                 Treasury stock                                                         3,200  

Dec 31       Net Income ( Income Summary)      158,400

                  Retained Earnings                                               158,400

Balance sheet as at Dec 31

Equity

Common stock at $10 par value                                      $195,000

7% Preferred Stock                                                            410,000

Paid in capital for common stock                                        97,500

Paid in capital for Preferred stock                                        90,300

Retained Earnings ( 158,400-6825-3200)                         <u> 148,375</u>

                                                                                             <u>  941,175</u>

Explanation:

4 0
3 years ago
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