Lowest Acceptable transfer price for Pulp Division = $21 i.e.Selling Price to outside customers
Highest Acceptable transfer price for Carton Division = $21*0.9 = $18.9 (current purchase price)
No Acceptable Range
Not likely to Agree
2.Effect on pulp Division:
Loss on 31,000 tons = (21-18.9)*31,000 = $65,100
Profits of pulp division will decrease by $65,100
Carton Division = No effect (same price as before)
Company as a whole = Loss of $65,100
i.e. profits will decrease by $65,100
3.Space Capacity Exists
Lowest Acceptable transfer price = Variable Cost = $11
Highest Acceptable Transfer Price for Carton Division = $21*0.9 = $18.9 (current purchase price)
Range of acceptable transfer price = $11-$18.9
Yes, they are likely to voluntarily agree
4a – The price is still higher than the variable cost to the pulp division, it should meet this price.
4b Effect on profits of the company is equal to loss of $5 per ton
=31,000*$5 = loss of $155,000
i.e. profits will reduce by $155,000
5. The carton division can accept a higher price for the good of the company as a whole
6. Effect on profits of the company:
Increase in profits of pulp division = 31,000*(21-11) = $310,000
Loss of Carton Division = 31,000*(21-18.9) = $65,100
Net benefit to the company = $244,900
Hence, profits will increase by $244,900
Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the production...
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Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the production of various paper goods Revenue and costs associated with a ton of pulp follow $12 Selling price Expenses: Variable Fixed (based on a capacity of 103,000 tons per year) Net operating income Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be treated as a division of Hrubec with full profit responsibility. The newly formed Carton Division is...
Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the production of various paper goods. Revenue and costs associated with a ton of pulp follow: Selling price $ 25 Expenses: Variable $ 16 Fixed (based on a capacity of 97,000 tons per year) 6 22 Net operating income $ 3 Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be treated as a division of Hrubec with full profit...
Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the production of various paper goods. Revenue and costs associated with a ton of pulp follow: $20 $10 Selling price Expenses: Variable Fixed (based on a capacity of 97,000 tons per year) Net operating income 6 16 Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be treated as a division of Hrubec with full profit responsibility. The newly formed...
Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the production of various paper goods. Revenue and costs associated with a ton of pulp follow: $23 $14 Selling price Expenses: Variable Fixed (based on a capacity of 101,000 tons per year) Net operating income 6 2 33 Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be treated as a division of Hrubec with full profit responsibility. The newly...
Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the production of various paper goods. Revenue and costs associated with a ton of pulp follow: Selling price $ 21 Expenses: Variable $ 11 Fixed (based on a capacity of 95,000 tons per year) 6 17 Net operating income $ 4 Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be treated as a division of Hrubec with full profit...
Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the production of various paper goods. Revenue and costs associated with a ton of pulp follow: Selling price $ 24 Expenses: Variable $ 14 Fixed (based on a capacity of 95,000 tons per year) 6 20 Net operating income $ 4 Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be treated as a division of Hrubec with full profit...
Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the production of various paper goods. Revenue and costs associated with a ton of pulp follow: $20 $10 Selling price Expenses : Variable Fixed (based on a capacity of 96,000 tons per year) Net operating income Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be treated as a division of Hrubec with full profit responsibility. The newly formed Carton...
Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the production of various paper goods. Revenue and costs associated with a ton of pulp follow: $ 20 Selling price Expenses: Variable Fixed (based on a capacity of 102,000 tons per year) Net operating income Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be treated as a division of Hrubec with full profit responsibility. The newly formed Carton Division...