5 20 85020 3 new minimum 27 new maximum 32 27

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Unformatted text preview: + $8.50/$20). 3. New minimum: $27 New maximum: $32 ($27 + $32)/2 = $29.50 or full cost plus 47.5% ($20 + $9.50/20) 4. The two divisions would renegotiate because the buying division would probably be able to buy the necessary part at a lower price from another supplier. The Auxiliary Components Division might have to reduce its price. 10–27 1. Lorne should not reduce the price charged to Rosario if he can sell all he produces. It does not matter whether the two divisions trade internally or not. 2. The minimum price is $53, and the maximum is $75. Yes, Lorne should consider the transfer, since his income will increase by $59,500 [3,500($70 – $53)]. 3. The transfer price would be $75.60 ($63 × 1.2). No, the transfer would not occur, since the transfer price is higher than the outside price that Rosario could get. 10–28 1. Sales Variable expenses Contribution margin Component Y34 $260,000 160,000 $100,000 339 Model SC67 $1,680,000 920,000 $ 760,000 Company $1,940,000 1,080,000 $ 860,000 2. The transfer price should be the market price of $12. This is the minimum price for the Components Division and the maximum price for the PSF Division. 3. Unless the PSF Division is able to increase the price of Model S667, the manager will discontinue production and will not purchase any of the components. (The cost of producing the scanner will increase from $38 to $43.50, a cost greater than the current selling price of $42.) 4. All 40,000 units of Component Y34 will be sold externally at the market price of $12 per unit. 5. Sales Variable expenses Contribution margin $480,000 160,000 $320,000 The contribution margin decreases by $540,000. Cam made the wrong decision. 10–29 1. Madengrad Company Variable-Costing Income Statement Budgeted for Next Year Sales (21,500 × $900) ................................................ Less variable expenses: Cost of goods sold (21,500 × $525) .................... $11,287,500 Selling (21,500 × $75) ......................................
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This document was uploaded on 11/26/2013.

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