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

1-1 define marketing and outline the steps in the marketing

1-1. Define marketing and outline the steps in the marketing process. (AACSB: Written and Oral Communication) 1-2. What is marketing myopia, and how can it be avoided? (AACSB: Written and Oral Communication; Reflective T ...

Essay objectivethe objective of this case study is to

Essay Objective: The objective of this case study is to understand Australian Conceptual Framework in accounting standard setting and in business practices. Discussions: You should select a company listed on the Australi ...

Part a1000 word short essay about the nature of impairment

Part A: 1000 word short essay about the nature of "Impairment loss" and required disclosures including referencing.

Part problema retail company had the following merchandise

PART: Problem A retail company had the following merchandise inventory activity for its widget product line during the current monthly period. * For Specific ID, 50 units were sold from the beginning inventory; 100 from ...

Your text notes that all of the business processes we have

Your text notes that all of the business processes we have studied feed data to the general ledger system. For each of the 5 business processes listed below: • Indicate which of the business events listed are activities ...

Taskin april 2016 the fair work ombusman released a report

Task In April 2016, the Fair Work Ombusman released a report on the findings of this inquiry on the 7 Eleven franchise network. The inquiry was prompted by allegations of systemic non-compliance with federal workplace la ...

Accounting questionsin the last module we discussed the

Accounting Questions: In the last module we discussed the reactive approach that can (and has been) taken by corporations to identify current fraudulent activities. The issue with this approach is that by the time corpor ...

Write the given assignmentinstructions this assignment is

Write the given assignment. Instructions This assignment is an essay and should include an abstract, introduction, body, conclusion and bibliography. Maximum word count 1500 words not including the abstract and bibliogra ...

Practice questionswhat influences have encouraged new

Practice questions: What influences have encouraged new developments in management accounting?

A taxpayer lives in michigan in a controversy with the irs

A taxpayer lives in Michigan. In a controversy with the IRS, the taxpayer loses at the trial court level. Describe the appeal procedure for each of the following trial courts. a. Small Cases Division of the Tax Court b. ...

  • 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

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate