Question

Bedtime Bedding Company manufactures pillows. The Cover Division makes covers and the Assembly Division makes the finished pillows. The covers can be sold separately for $5.00. The pillows sell for $6.00. The information related to manufacturing for the most recent year is as follows: Cover Division $6,000,000 $4,000,000 Assembly Division $1,500,000 $7,200,000 Manufacturing costs of division Sales to external parties Market value of covers transferred from the Cover Division to the Assembly Division $6,000,000 Required: a. Compute the operating income for each division and the company as a whole. Use market value as the transfer price. b. Are all managers likely to be happy with this approach? Explain.

Answer 1

? x - Sign in Doser FILE HOME INSERT PAGE LAYOUT Cut Calibri 11 Copy Paste Format Painter BI D A FORMULAS DATA A A === Book1 - Excel (Product Activation Failed) REVIEW VIEW ADD-INS On Wrap Text General P Merge & Center - $ % 48.08 Conditional Format as Cell Formatting Table Styles Alignment Number Styles X AutoSum A # S E Insert Delete Format - Cells Fill- Clear Sort & Find & Filter - Select Editing Clipboard Font B15 E F G H I J K L M N O P Q Sales to External Parties Transfer Price Revenue[A] Cover Division Assembly Division Company 4,000,000.00 7,200,000.00 11,200,000.00 6,000,000.00 10,000,000.00 7,200,000.00 11,200,000.00 6,000,000.00 7,500,000.00 Less: Manufacturing Cost Transfer Cost Cost [B] 1,500,000.00 6,000,000.00 7,500,000.00 6,000,000.00 7,500,000.00 Operating Income (A-B] 4,000,000.00 (300,000.00) 3,700,000.00 No, all managers are not happy with this approach because Manager of Assembly Division is at Net Loss Of $ 300,000 Sheet1 + Activate Windows Go to PC settings to activate Windows 0 0 0 - + 100% 2:18 PM 29-Feb-20 READY 1 é a wi PS X)