Determine the operating income for each division

Assignment Help Financial Management
Reference no: EM131051088

The Mill Flow Company has two divisions. The Cutting Division prepares timber at its sawmills. The Assembly Division prepares the cut lumber into finished wood for the furniture industry. No inventories exist in either division at the beginning of 2015. During the year, the Cutting Division prepared 60,000 cords of wood at a cost of $660,000. All the lumber was transferred to the Assembly Division, where additional operating costs of $6 per cord were incurred. The 600,000 board feet of finished wood were sold for $2,500,000.

Required

a. Determine the operating income for each division if the transfer price from Cutting to Assembly is at cost - $11 a cord.

b. Determine the operating income for each division if the transfer price is $9 per cord.

c. Since the Cutting Division sells all of its wood internally to the Assembly Division, does the manager care what price is selected? Why? Should the Cutting Division be a cost center or a profit center under the circumstances?

Reference no: EM131051088

Questions Cloud

Economic problem below please : Urgent please tutors, If possible kindly assist with the correct solution to the economic problem below please. Based on the Economists Explain the reason as to why college students choose to study.
Calculate the WACC and the value of the firm : Hose plc presently has a capital structure which is 30% debt and 70% equity. The cost of debt before taxes is 8% and for equity 15%. The firm's future cash flows, after tax but before interest, are expected to be perpetuity of €650.000. Calculate the..
Investment for the economy in general equilibrium : (a) Calculate the values of the real interest rate, the price level, consumption, and investment for the economy in general equilibrium. (b) Now suppose government purchases increase to 350 with no change in taxes. What will be the real interest ..
Prepare a outline paper about organizational conflict : Prepare a outline paper about Organizational Conflict:A Comparative ANALYSIS of Conflict Styles Across Cultures. Management in Action: Cultural Misunderstanding (example Joint Venture split - Legal Dispute).
Determine the operating income for each division : The Mill Flow Company has two divisions. The Cutting Division prepares timber at its sawmills. The Assembly Division prepares the cut lumber into finished wood for the furniture industry. No inventories exist in either division at the beginning of 20..
Two plans lead to an increase in social well-being : a) Will either proposal pass if just decided on its own?  Explain. b) Will a proposal combining both arenas pass?  Explain. c) Does the combining of the two plans lead to an increase in social well-being?  Explain
Firm goes directly to the market with the product : B&B has a new baby powder ready to market. If the firm goes directly to the market with the product, there is only a 60 percent chance of success. However, the firm can conduct customer segment research, which will take a year and cost $1.21 million...
Create your own probability problem : Create your own probability problem. Define what type of probability problem you have and show the best approach to solving the problem.
Which model of educational attainment better explains : Which model of educational attainment better explains these facts (and why)?

Reviews

Write a Review

Financial Management Questions & Answers

  What is marginal tax rate and average tax rate

New Hope Managed Care Inc., is a for-profit managed care company that serves the southwest United States. Last year, it reported $1,200,000 in income from operations, $250,000 in interest income from bonds it bought in the previous year, and $60,000 ..

  Consider conducting an npv analysis

For a one-shot short-term project, which of the following is a reason a financial analyst may NOT consider conducting an NPV analysis? a. money has time value b. cash flows can usually be more accurately evaluated c. difficulties in estimating the ap..

  What is the bonds nominal yield to call

Cable Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon, semi annual payments, and a $1,000 par value. The bond has a 6.50% nominal yield to maturity, but it can be called in 6 years at a price of $1,120. What is th..

  The growth rate in dividends for all three companies

Red, Inc., Yellow Corp., and Blue Company each will pay a dividend of $2.45 next year. The growth rate in dividends for all three companies is 5 percent. The required return for each company’s stock is 8 percent, 11 percent, and 14 percent, respectiv..

  Furthering plans for expansion of manufacturing facilites

Felicia & Fred’s Firm have now considered furthering their plans for expansion of manufacturing facilities. Their first option is by customizing and refurbishing the large former mill building located in New England near the main production facility...

  The cost of equity for an all equity firm

The Lanoi Company has EBIT of $30,000 and market value debt of $150,000 outstanding with an 8% coupon rate. The cost of equity for an all equity firm would be 12%. Aggie has a 30% corporate tax rate. Investors face a 20% tax rate on debt receipts and..

  What is the price of the stock today

Upper Gullies Corp. just paid a dividend of $2.10 per share. The dividends are expected to grow at 21 percent for the next eight years and then level off to a growth rate of 7 percent indefinitely. If the required return is 14 percent, what is the pr..

  Statement regarding executive stock-lower risk free rates

Lower risk free rates results in __________ Put Option prices and ______ Call Option Prices. Which statement regarding executive stock options is correct?

  What would be the financial institutions net savings

An interest rate cap of 7% with a notational value of $18.9 million is available for a premium of 0.58%. The same notational value 3% floor is available for a premium of 0.64%. If current interest rates are at 8%, what would be the a financial instit..

  What is the stocks current value

The Felix Corp. will pay an annual dividend of $1.00 next year. The dividend will increase by 12 percent a year for the following two years before growing at 4 percent indefinitely thereafter. If the required rate of return is 10 percent, what is the..

  Is it better off to pay a loan monthly or annually

Assume a car loan amount of $100,000, with annual interest rate 3% and 5 years term. Calculate annual payment amount. Calculate monthly payment amount. Is it better off to pay a loan monthly or annually? Why?

  Programs is an education reform program

Which of the following programs is an education reform program?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd