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

Assignmentyour accounting firm has been asked to recommend

Assignment Your accounting firm has been asked to recommend an online accounting system for several businesses who are looking to automate their accounting. Research five online accounting systems (including QuickBooks O ...

Learning outcomescode descriptiona1 in-depth and systematic

Learning outcomes Code Description A1 in-depth and systematic understanding of key investment concepts to facilitate strategic real estate investment decision-making A4 critical awareness and understanding of the evolvin ...

Accounting assignmentbullemployee theft is a major problem

Accounting Assignment • Employee theft is a major problem in the U.S. retail industry. Information obtained from SecurityInfoWatch reported that twenty three (23) major retailers alone apprehended over 1.1 million shopli ...

Question 1if total liabilities are 1000 and total assets

Question 1 If total liabilities are $1,000 and total assets are $8,000, owner's equity must be A. $7,000. B. $3,000. C. $10,000. D. $13,000. Question 2 If total assets are $30,000 and total liabilities are $18,000, capit ...

Question 1based upon the narrative describing the case what

Question 1: Based upon the narrative describing the case, what cultural element (per Ferraro) was most likely a major contributing factor to the accident? Question 2: If you were brought to the investigation, what recomm ...

Question 1based upon the material covered from the readings

Question #1 Based upon the material covered from the readings and/or videos from Week 8, highlight the three most important concepts you learned this week and how each of these concepts will help you in appreciating the ...

Question 1under the allowance method bad debt expense is

Question 1 Under the allowance method, Bad Debt Expense is recorded A. as an estimate. B. when an individual account is written off. C. several times during the year as needed. D. None of the above Question 2 Which amoun ...

Culturally diverse individuals are effective workerssuppose

Culturally Diverse Individuals Are Effective Workers Suppose you work as a human resource (HR) executive at Total Solutions, Inc., a culturally and geographically diverse organization. A recent government study on human ...

Assignmentapplication break-even analysiswhen expenses and

Assignment Application: Break-Even Analysis When expenses and revenues are equal, this is known as the "break-even point" or BEP. To determine break-even, an examination of fixed and variable costs (expenses) in relation ...

1 the concept of cost-benefit permeates smart decision

1. The concept of "Cost-Benefit" permeates smart decision making and accounting principles. How does this concept relate to incremental analysis. Provide an example to illustrate your point. Cost Benefit Respond 2. A cos ...

  • 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