2 In order to reduce income taxes Gemini should use a transfer price of 64

2 in order to reduce income taxes gemini should use a

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Variable cost per unit64.00Contribution margin per unit0.00Income taxes0.00Increase in division income per unit after tax$ 0.00Castor’s after tax income on each unit is as follow:Revenue per unit$120.00Variable cost per unit64.00Contribution margin per unit56.00Income taxes (0.30 x $56)16.80Increase in division income per unit after tax$ 39.20b. Castor will not want that Pollux takes the offer.c. Pollux will want to take the order because its income per unit after tax will increase by $3.60 per unit by accepting the special order instead of transferring. d. Gemini should set the transfer price at $70 per unit.Minimum transfer price = $64 + $6 = $70 per unit for the first 8,000 units$64 + $0 = $64 per unit for the next 7,000 unitsGemini should consider this transfer prices since they are a very reasonable and tax efficient. The increase in Gemini’s income will be as follow:From Pollux:Revenue per unit$70.00Variable cost per unit64.00Contribution margin per unit6.00Income taxes (0.40 x $6)2.40Increase in division income per unit after tax$ 3.60From Castor:Revenue per unit$120.00Variable cost per unit70.00Contribution margin per unit50.00Income taxes (0.30 x $50)15.00Increase in division income per unit after tax$ 35.00Increase in Gemini’s income = $3.60 + $35.00 = $38.60221.The transfer price is 110% of the full cost per unit:1.10 [($0.075 x 100) + $6.35 + $2.15] = $17.60
The manager would purchase the 2,000 rolls from ecofree since $17.00 is below the transfer price of $17.60.2.$18.50 is an appropriate market price and not $17.00 because it could not be replicated. The manufacturing manager was not thinking straight because they were withholding pertinent information from the uppers management and the recycling division manager. 221.$80,000: (10,000 units) x ($32 - $12 - $8) - $80,000 = $40,000$120,000: (15,000 units) x ($32 - $12 - $8) - $120,000 = $60,000$160,000: (18,000 units) x ($32 - $12 - $8) - $160,000 = $56,0002.Croydon receives a transfer price of $8 for each additional unit. However, it is incurring a variablecost of $4.80 for infrared LED. 3.(10,000 units) x ($32 - $12 - $4.80) - $80,000 = $72,000(15,000 units) x ($32 - $12 - $4.80) - $120,000 = $108,000(18,000 units) x ($32 - $12 - $4.80) - $160,000 = $113,6004.(18,000 units) x ($32 - $12 – p) - $160,0000 ≥ (15,000 units) x ($32 - $12 – p) - $120,000or (3,000 units) x ($20 – p) ≥ $40,000or p ≤ $6.67(18,000 units) x ($32 - $12 – p) - $160,0000 ≥ (10,000 units) x ($32 - $12 – p) - $80,000or (8,000 units) x ($20 – p) ≥ $80,000or p ≤ $10221.The answer is as follow:Pounds of ranbax processed in S1,0002,0003,0004,000Total net revenues from sale of syntax$500$850$1,100$1,200

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