Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

Better Food Company recently acquired an olive oil processing company that has an annual capacity of 2,000,000 litres, and that processed and sold 1,400,000 litres last year at a price of $4 per litre. The purpose of the acquisition was to furnish oil for the Cooking div'n. The Cooking Div'n needs 800,000 litres of oil per year. It has been purchasing oil from suppliers at the market price. Production costs at capacity of the olive oil company now a division, are as follows:

Direct materials per litre $1.00
Direct Processing labour 0.50
Variable processing Overhead 0.24
Fixed Processing Overhead 0.40
Total $2.14

Management is trying to decide what transfer price to use for sales from the newly acquired company to the Cooking Div'n. The manager of the Olive Oil Div'n argues that $4, the market price is appropriate. The manager of the Cooking Div'n argues that the cost of $2.14 should be used or perhaps a lower price, since fixed overhead cost should be recomputed with the larger volume. Any output of the Olive Oil Div'n not sold to the Cooking Div'n can be sold top outsiders for $4 per litre.

Required:
(a) find out the operating income for the Olive Oil Div'n using a transfer price of $4.
(b) find out the operating income of the Olive Oil Div'n using a transfer price of $2.14.
(c) What transfer price(s) do you recommend? find out the operating income for the Olive Oil Division using your recommendation.

 

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M945452

Have any Question? 


Related Questions in Accounting Basics

Problem 3-2 lo 2 simple equity method adjustments

Problem 3-2 (LO 2) Simple equity method adjustments, consolidated worksheet. On January 1, 2015, Paro Company purchases 80% of the common stock of Solar Company for $320,000. Solar has common stock, other paid-in capital ...

Assignment question 1 -impulse pty ltd impulse is an

Assignment Question 1 - Impulse Pty Ltd (Impulse) is an entertainment system manufacturer that was established in 2005. Your audit firm King & Queen have been the auditor of Impulse since its formation. The audit report ...

Accounting assignmentthis project requires you to select a

Accounting Assignment This project requires you to select a business and analyze part of its accounting information system. You will focus on a selected business process, develop conclusions from your observations, and a ...

Questionsq1 discuss how the sec has influence if any over

Questions: Q1: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc. Q2: Discuss the essential activities involved in the initial planning of an audit. How do these all specifically to the ...

Question 1 buttercup corporation issued 300

Question 1 Buttercup Corporation issued 300 shares of $10 par value common stock for $4,500. Prepare Buttercup's journal entry. (Credit account titles are automatically indented when amount is entered. Do not indent manu ...

Gasbvisit the website of the governmental accounting

G.A.S.B Visit the website of the Governmental Accounting Standards Board (G.A.S.B.) at http://gasb.org. Review the website to learn about the organization, its act ivies, and its goals. Review one or more of the "Plain-L ...

1 if a bartender can somehow accumulate extra liquor and

1. If a bartender can somehow accumulate extra liquor, and does not register the extra drinks, which of these activities could be spotted by the analytical methods we studied? A. The bartender steals the extra liquor B. ...

Accounting theory and contemporary issues individual case

Accounting Theory and Contemporary Issues Individual case study Assignment- Assessment Description - Learning Outcome:  Research and argue a position in regard to a contemporary issue in the accounting profession. Evalua ...

Assessment-bullassessment instructionspreparationfor this

Assessment- • Assessment Instructions Preparation For this problem, you will need to select a publicly traded company. Once you have selected a publicly traded company, obtain Form 10-K for the company for the most curre ...

Assignmentthis assignment has 2 parts 1000 10 word theory

Assignment This assignment has 2 parts, 1000 + 10% word theory interpretation essay and a response to a practical application of the theory. The assignment must be typed, use Arial font, 12, to avoid plagiarism, make sur ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro