value: 3.63 points Problem 15-36 Evaluate Profit Impact of Alternative Transfer

Question

value: 3.63 points Problem 15-36 Evaluate Profit Impact of Alternative Transfer Decisions (LO 15-2, 3) Amazon Beverages produces and bottles a line of soft drinks using exotic fruits from Latin America and Asia. The manufacturing process entails mixing and adding juices and coloring ingredients at the bottling plant, which is a part of Mixing Division. The finished product is packaged in a company-produced glass bottle and packed in cases of 24 bottles each Because the appearance of the bottle heavily influences sales volume, Amazon developed a unique bottle production process at the company's container plant, which is a part of Container Division. Mixing Division uses all of the container plant's production. Each division (Mixing and Container) is considered a separate profit center and evaluated as such. As the new corporate controller, you are responsible for determining the proper transfer price to use for the bottles produced for Mixing Division At your request, Container Division's general manager asked other bottle manufacturers to quote a price for the number and sizes demanded by Mixing Division. These competitive prices follow:

Explanation / Answer

a Operating profit for container division (All calculations are in $000.) a1 Sales 11760 (1680*7) Cost 10528 (1120+(5.6*1680) Profit 1232 a2 Operating profit for Mixing division (All calculations are in $000.) Sales 27888 (1680*16.6) Cost 15320 (11760 (transfer)+(3560)) Profit 12568 a3 Operating profit for Amzon beverages profit (All calculations are in $000.) Sales 27888 (1680*16.6) Cost 14088 (11760 (transfer)+(3560)) Profit 13800 b b1 Container division volume (All calculations are in $000.) Cases 560 1120 1680 revenves 4928 8736 11760 cost 4094 7235 10366 profit 834 1501 1394 Most profitable is 1120000 cases b2 Mixer division volume (All calculations are in $000.) Cases 560 1120 1680 revenves 11200 20160 25200 cost 6888 11491 15322 profit 4312 8669 9878 Most profitable is 1680000 cases b3 Amazon beverages volume (All calculations are in $000.) Cases 560 1120 1680 revenves 12096 21952 27888 cost 6054 9990 13927 profit 6042 11962 13961 Most profitable is 1680000 cases

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