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Gage Corporation has two operating divisions in a semi autonomous organizational structure. Adams Division, located in the United States, produces a specialized electrical component that is an input to Bute Division, located in the south of England. Adams uses idle capacity to produce the component, which has a domestic market price of $36. Its variable costs are $15 per unit. Gage's U.S. tax rate is 40 percent of income. In addition to the transfer price for each component received from Adams, Bute pays a $9 per unit shipping fee. The component becomes a part of its assembled product, which costs an addition $6 to produce and sells for an equivalent of $69. Bute could purchase the component from a Manchester (England) supplier for $30 per unit. Gage's English tax rate is 70 percent of income. Assume that English tax laws permit transferring at either variable cost or market price. Required: A. What transfer price is economically optimal for Gage Corporation? Show computations. B. Is it ethical to choose a transfer price for tax purposes that is different from the transfer price used to evaluate a business unit's performance? C. Suppose Gage had a third operating division, Case, in Singapore, where the tax rate is below that of the United States. Would it be ethical for Gage to use different transfer prices for transactions between Adams and Bute and between Adams and Case?
Discuss how this increase in ownership affects the accounting for and reporting upon the investment in Broome. Include in your discussion adjustments.
The subsequent information was gathered about the two products - Find the total sales-quantity variance in terms of budgeted contribution margin?
The Assembly Division of the same company needs a part that is just like Product A. The Assembly Division can choose whether to buy Product A from an outside supplier for $14.15 or buy it internally from the Parts Division. and evaluate the most ..
Evaluate the most profitable combination of products to be produced next year. Purpose an income statement using the contribution margin format for the product volume computed in 1.
Assume that no new investments were made in net fixed assets or net working capital, and no new stock was issued during the year. Calculate the firm's new long-term debt added during the year.
Differences between the book value and the fair value of the identifiable assets of Salem Company
The yield to maturity on new issues of similar corporate bonds is 5.2%. Someone offers you $1,225 for your bond. Is this a fair price, to you the seller? What is the fair price?
Evaluate the equivalent units of production with respect to direct materials and direct labor. Evaluate both the direct labor cost and the direct materials cost per equivalent unit.
How liquid is Heavy-Duty Tractors? Support your answer with any ratios that you believe are necessary to justify your conclusion. Also indicate any other information that you would want to have in making a final determination on its liquidity.
Determine the pension liability/asset to be recorded and determine the 2012 amortization of the net gain.
Estimates of investment costs, operating expenses and sales
Purpose summary journal entries related to the (1) sales, (2) sales returns, (3) collections of accounts receivable, and (4) write-offs of accounts receivable for the year ended September 30, 2009.
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