The Mill Flow Company has two divisions. The cutting Division prepares timber at

Question

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 funiture industry. No inventories exist in either division at the beginning of 20X5. During the year, the Cutting Division prepared 60,000 cords of wood at a cost of $660,000. All the lumber was transffered to the assembly division, where additional operating costs of $6 per cord were inccured. The 600,000 boardfeet of finished wood were sold for $2,500,000. Determine the operating income for each division if the transfer price is $9 per cord.

Explanation / Answer

Statement showing Income Particulars Cutting Division Assembly Division Transfer Price                 540,000.00                        2,500,000.00 Cost Incurred               660,000.00                            360,000.00 Cost from prev depttt= tfr price                            540,000.00 Operating Income (Loss)             (120,000.00)                        1,600,000.00

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