Assignment
1. Paige Company has completed all of its operating budgets. The sales budget for the year shows 50,000 units and total sales of $2,000,000. The total unit cost of making one unit of sales is $22. Selling and administrative expenses are expected to be $300,000. Income taxes are estimated to be $150,000. Prepare a budgeted income statement for the year ending December 31, 2011. (Enter all amounts as positive amounts and subtract where necessary.)
2. For Eckert Inc. variable manufacturing overhead costs are expected to be $20,000 in the ±rst quarter of 2011 with $4,000 increments in eachof the remaining three quarters. Fixed overhead costs are estimated to be $35,000 in each quarter. Prepare the manufacturing overheadbudget by quarters and in total for the year.
3. Allied Company's Small Motor Division manufactures a number of small motors used in household and office appliances. The Household Division of Allied then assembles and packages such items as blenders and juicers. Both divisions are free to buy and sell any of their components internally or externally. The following costs relate to small motor LN233 on a per unit basis.
Fixed cost per unit $ 5
Variable cost per unit 8
Selling price per unit 30
(A) Assuming the small motor div. has excess capacity, compute the minimum acceptable price for the transfer of small motor LN233 to the Household Division.
(B) Assuming - small motor div. does not have excess capacity, compute the minimum acceptable price for transfer of the motor to household div.
(C) Explain why the level of capacity in small motor div. has and effect on the transfer price.