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skully skully
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7 years ago
Vitamin D Dairy has two divisions, Distribution and Production. The company's primary product is milk. Each division's costs are provided below:

Production:   Variable costs per gallon   $0.07
   Fixed costs per gallon   $0.40
Distribution:   Variable costs per gallon   $0.08
   Fixed costs per gallon   $0.05

The Distribution Division has been operating at a capacity of 4,500,000 gallons a week and usually purchases 2,250,000 gallons from the Production Division and 2,250,000 gallons from other suppliers at $1.00 per gallon.

Required
What is the transfer price per gallon from the Production Division to the Distribution Division, assuming the method used to place a value on each gallon of milk is 170% of variable costs? Next, compute the transfer price per gallon from the Production Division to the Distribution Division, assuming the method used to place a value on each gallon of milk is 130% of full costs.
Assume 150,000 gallons are transferred from the Production Division to the Distribution Division for a transfer price of $0.85 per gallon. The Distribution Division sells the 150,000 gallons at a price of $1.20 each to customers. What is the operating income of both divisions together?
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Managerial Accounting: Decision Making and Motivating Performance

Managerial Accounting: Decision Making and Motivating Performance


Edition: 1st
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Managerial Accounting: Decision Making and Motivating Performance
University of Pittsburgh
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noitulovenoitulove
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skully Author
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7 years ago
You're way better than my teacher, thanks Thumbs Up Sign
Managerial Accounting: Decision Making and Motivating Performance
University of Pittsburgh
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