The Greek Company has two divisions, Beta and Gamma. Gamma Division produces a p

Question

The Greek Company has two divisions, Beta and Gamma. Gamma Division produces a product at a variable cost of $6 per unit, and sells 150,000 units to outside customers at $11 per unit and 40,000 units to Beta Division at variable cost plus 40 percent. Under the dual transfer price system, Beta Division pays only the variable cost per unit. Gamma Division's fixed costs are $250,000 per year. Beta Division sells its finished product to outside customers at $24 per unit. Beta has variable costs of $5 per unit, in addition to the costs from Gamma Division. Beta Division's annual fixed costs are $170,000. There are no beginning or ending inventories.

(a) Prepare the income statements for the two divisions and the company as a whole.

Do not enter any answer as negative numbers.

Greek Company Divisional
Income Statement Beta Gamma Company Sales: External $Answer $Answer $Answer Internal Answer Answer Answer Total Answer Answer Answer Variable costs: Incurred Answer Answer Answer Transferred in Answer Answer Answer Total Answer Answer Answer Contribution margin Answer Answer Answer Fixed costs Answer Answer Answer Net income $Answer $Answer $Answer

Explanation / Answer

(a) Prepare the income statements for the two divisions and the company as a whole. Do not enter any answer as negative numbers. Greek Company Divisional Income Statement (All amounts in $) Beta Gamma Company Sales: External 960000 1650000 2610000 Internal 336000 336000 Total 960000 1986000 2946000 Variable costs: Incurred 200000 1140000 1340000 Transferred in 240000 240000 Total 440000 1140000 1580000 Contribution margin 520000 846000 1366000 Fixed costs 250000 170000 420000 Net income 270000 676000 946000

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