User Account

All Pages

West Industries, Cost Accounting

Assignment Help:
West Industries is a highly decentralized corporation with independent operating divisions.
Each division is evaluated and rewarded based on its total net income. One of the divisions,
Visic, manufactures and sells air conditioners. Visic is projecting sales of 17,400 for next year.
Another division, Weber, makes and sells compressors. Its projected income statement for
next year follows:
Weber Division
Pro forma income statement
For next year
Per unit Total
Sales revenues $100 $ 6,400,000
Less cost of goods sold:
Direct materials 12 768,000
Direct labour 8 512,000
Variable overhead 10 640,000
Fixed overhead 11 704,000
41 2,624,000
Gross profit 59 3,776,000
Operating expenses:
Variable selling expenses 6 384,000
Fixed selling expenses 4 256,000
Fixed administrative expenses 7 448,000
17 1,088,000
Pre-tax net income $ 42 $ 2,688,000
Weber has the capacity to produce 75,000 compressors annually. Visic currently purchases
compressors from an outside source at $70, and proposes that Weber transfer compressors to
it at a transfer price of $50. The Visic manager justified the low bid based on some cost
savings that should be realized if compressors are transferred. Because specifications for this
compressor are slightly different from Weber’s standard model, $1.50 of direct materials cost
per compressor can be saved and no variable selling expenses will be incurred on
compressors transferred.
Required:
a) Compute the minimum transfer price Weber should accept.
b) Compute the estimated effect on Weber’s net income if the 17,400 compressors are
transferred at $50 each.
c) Determine whether it would be in West Industries’ best interest for Weber to transfer
compressors at $50 each.

Related Discussions:- West Industries

Subsidiary ledgers and control accounts, Example B & B Mechanical Repai...

Example B & B Mechanical Repairs is a small, family owned partnership that specialises in the servicing and repair of motor vehicles. The business employs three qualified mecha

Distinction between absorption and marginal costing, Distinction between Ab...

Distinction between Absorption and Marginal Costing These are two approaches of arriving at the cost of production or total profit for a specified period. The major difference

.., process costing new practices

process costing new practices

Journal entries , mark-up of 25%

mark-up of 25%

CONCEPT AND OBJECTIVES, what are the concept and objectives of cost account...

what are the concept and objectives of cost accounting?

ASSIGNMENT ON HAMPSHIRE PROJECT, tHE FIRST SECTION ASSIGEMTN ANSWER FOR HAM...

tHE FIRST SECTION ASSIGEMTN ANSWER FOR HAMPSHIR COMPANY DECISIONS

Calculate the retained profit, Harriet Ltd is a trading company set up a nu...

Harriet Ltd is a trading company set up a number of years ago with 5,000 £1ordinary shares issued at par. In order to expand the production facilities it needs to raise a further £

Student, i asking for start up

i asking for start up

Traditional income statement, Traditional income statement: The DU Inn i...

Traditional income statement: The DU Inn is an 80-room hotel located on some mountaintop in Colorado. It has no bar or restaurant and is positioned as a mid-priced, good quality

Conceptualizing job costing, Conceptualizing Job Costing Start to devel...

Conceptualizing Job Costing Start to develop an understanding of job costing by thinking about the simple illustration. Jack Castle owns an electrical constricting company, Cas

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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