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    Chapter 13 - Resp-Acctg PT 4

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    Hiraya Manawari
    The document discusses a company called Computer Solutions Corporation that has two divisions: Computer Chip Division and Computer Division. The Computer Chip Division manufactures chips that can be used internally or sold externally. Presently the Computer Division purchases chips externally for $45 each instead of from the Computer Chip Division. The summary provides answers to questions about possible transfer prices between the divisions.

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    © All Rights Reserved
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    Chapter 13 - Resp-Acctg PT 4

    Uploaded by

    Hiraya Manawari
    23 views3 pages
    The document discusses a company called Computer Solutions Corporation that has two divisions: Computer Chip Division and Computer Division. The Computer Chip Division manufactures chips that can be used internally or sold externally. Presently the Computer Division purchases chips externally for $45 each instead of from the Computer Chip Division. The summary provides answers to questions about possible transfer prices between the divisions.

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    Chapter 13- Resp-Acctg pt 4

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    The document discusses a company called Computer Solutions Corporation that has two divisions: Computer Chip Division and Computer Division. The Computer Chip Division manufactures chips that can be used internally or sold externally. Presently the Computer Division purchases chips externally for $45 each instead of from the Computer Chip Division. The summary provides answers to questions about possible transfer prices between the divisions.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    23 views3 pages

    Chapter 13 - Resp-Acctg PT 4

    Uploaded by

    Hiraya Manawari
    The document discusses a company called Computer Solutions Corporation that has two divisions: Computer Chip Division and Computer Division. The Computer Chip Division manufactures chips that can be used internally or sold externally. Presently the Computer Division purchases chips externally for $45 each instead of from the Computer Chip Division. The summary provides answers to questions about possible transfer prices between the divisions.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 3

    Chapter 13-

    -Responsibility Accounting
    and Transfer Pricing in Decentralized Organizations
    Computer Solutions Corporation

    Computer Solutions Corporation manufactures and sells various high-tech office automation
    products. Two divisions of Office Products Inc. are the Computer Chip Division and the
    Computer Division. The Computer Chip Division manufactures one product, a "super chip," that
    can be used by both the Computer Division and other external customers. The following
    information is available on this month's operations in the Computer Chip Division:

    Selling price per chip $50


    Variable costs per chip $20
    Fixed production costs $60,000
    Fixed SG&A costs $90,000
    Monthly capacity 10,000 chips
    External sales 6,000 chips
    Internal sales 0 chips

    Presently, the Computer Division purchases no chips from the Computer Chips Division, but
    instead pays $45 to an external supplier for the 4,000 chips it needs each month.

    33. Refer to Computer Solutions Corporation. Assume that next month's costs and
    levels of operations in the Computer and Computer Chip Divisions are similar to this month.
    What is the minimum of the transfer price range for a possible transfer of the super chip from
    one division to the other?
    a. $50
    b. $45
    c. $20
    d. $35

    ANS: C
    $20 is the incremental internal cost of the chip.

    34. Refer to Computer Solutions Corporation. Assume that next month's costs and
    levels of operations in the Computer and Computer Chip Divisions are similar to this month.
    What is the maximum of the transfer price range for a possible transfer of the chip from one
    division to the other?
    a. $50
    b. $45
    c. $35
    d. $30

    ANS: B
    $45 is the external price paid for the chip.

     
    35. Refer to Computer Solutions Corporation. Two possible transfer prices (for 4,000
    units) are under consideration by the two divisions: $35 and $40. Corporate profits would be
    ___________ if $35 is selected as the transfer price rather than $40.
    a. $20,000 larger
    b. $40,000 larger
    c. $20,000 smaller
    d. the same

    ANS: D

    Transfer prices are for internal use only; external profits are not affected.

    36. Refer to Computer Solutions Corporation. If a transfer between the two divisions
    is arranged next period at a price (on 4,000 units of super chips) of $40, total profits in the
    Computer Chip division will
    a. rise by $20,000 compared to the prior period.
    b. drop by $40,000 compared to the prior period.
    c. drop by $20,000 compared to the prior period.
    d. rise by $80,000 compared to the prior period.

    ANS: D
    $(40 - 20)/unit * 4,000 units = $80,000

    37. Refer to Computer Solutions Corporation. Assume, for this question only, that the
    Computer Chip Division is selling all that it can produce to external buyers for $50 per unit. How
    would overall corporate profits be affected if it sells 4,000 units to the Computer Division at
    $45? (Assume that the Computer Division can purchase the super chip from an outside supplier
    for $45.)
    a. no effect
    b. $20,000 increase
    c. $20,000 decrease
    d. $90,000 increase

    ANS: C
    $5.00/unit * 4,000 units = $20,000 decrease in profit

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