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LenaWriter [7]
3 years ago
9

The Engine Division of MurphyMotor Corporation uses 5,000 carburetors per month in its production of automotive engines. It pres

ently buys all of the carburetors it needs from two outside suppliers at an average cost of $100. The Carburetor Division of MurphyMotor Corporation manufactures the exact type of carburetor that the Engine Division requires. The Carburetor Division is presently operating at its capacity of 15,000 units per month and sells all of its output to a foreign car manufacturer at $106 per unit. Its cost structure (on 15,000 units) is: Variable production costs $70 Variable selling costs 10 All fixed costs 10 Assume that the Carburetor Division would not incur any variable selling costs on units that are transferred internally. Refer to MurphyMotor Corporation. If the two divisions agree to transact with one another, corporate profits will:__________:
a. rise by $50,000 per month
b. drop by $30,000 per month
c. rise or fall by an amount that depends on the level of the transfer price
d. rise by $20,000 per month
Business
1 answer:
r-ruslan [8.4K]3 years ago
3 0

Answer:

The correct option is d. rise by $20,000 per month.

Explanation:

Since it is assumed that the Carburetor Division would not incur any variable selling costs on units that are transferred internally, this implies that the variable selling costs is NOT relevant to the determination of the transfer price per unit to be used in calculating corporate profit. Therefore, the transfer price per unit can be calculated as follows:

Transfer price per unit = Price to foreign car manufacturer per unit = Price to foreign car manufacturer per unit - Variable selling costs per unit = $106 - $10 = $96

Rise in corporate profit per month = (Average cost per unit from the two outside suppliers - Transfer price per unit) * Number of carburetors used per month = ($100 - $96) * 5,000 = $20,000

This shows that if the two divisions agree to transact with one another, corporate profits will: <u>rise by $20,000 per month</u>.

Therefore, the correct option is d. rise by $20,000 per month.

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Answer:

Gain= $850

Explanation:

Giving the following information:

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<u>First, we need to calculate the annual depreciation:</u>

Annual depreciation= (original cost - salvage value)/estimated life (years)

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4 0
3 years ago
Which of these options for saving money typically offers the least liquidity?. . A.Savings bond. B.Money market account. C.Certi
zhuklara [117]
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How does an organization get the most out of its large data without
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By Focusing on Key Performing Indicators (KPIs)

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However, some firms <em>get lost in large data</em> and this is because of overwhelming amount of information and failure to focus on their industry`s Key Performance Indicators (KPIs).

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Answer:

c) $25,000

Explanation:

A property dividend should be recorded in retained earnings at the property's  <u>market value at date of declaration.</u>

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