MANAGERIAL ACCOUNTING

Managerial Accounting



Managerial Accounting

Finance

6A-1: Make or Buy

The cost savings which will be made by the company will be 208000-168000 = 40000 of cumulative savings which will be equivalent to .50 per package.

The subjective factors which will be considered while making the decision is the quality of the packages provided by the company, timely manufacturing and delivering the packages to the company and consistency in quality of packages manufactured.

By buying boxes from Weyerhaeuser the company is saving approximately 288000 on the purchase of 80000 boxes. The depreciation costs will also be added into the costs in order to provide a complete landscape.

10-48 Transfer Pricing Concession

As a division controller of US I would not recommend supplying the product at $7.00 because I am selling the product for $11 and the least possible is that I can sell the product for $10 in case Australian division purchases in bulk quantities.

Short run economic advantage is possible because of the quantum purchased by the company but in the longer run the prices will have to be increased and if the quantity decreases the company will be in loss by selling the product at less than $11 per unit.

The organizational and behavioral difficulties which might be inherent or present at the moment are the differences in business values of the individuals which because one will be dealing from United States and other will be dealing from Australia, further more the company will be using the products of another company in their devices

and there is no such surety provided that the name of the company will be used.

10-A1: ROI and economic profit calculations



Tinker

Evers

Chance

Return on Sales

180/3600

126/1200

360/9000

Capital Turnover

2000/3600

600/1200

1800/9000

ROI

180/2000

126/600

360/1800

As per the ROI Evers is better because of it has a return of 21 percent.

Economic Profit

180-200= -20

126-60 = 66

360-180 =180

As per economic profit calculation the best performer is Chance.

10-A2 Transfer Pricing Dispute

3000 x 310 = 930000 Total cost3000 x 300 = 900000 Total Revenueloss of 3000030 x 3000 = 90000 (Total cost/Loss of 90000 if units are not sold to Graubunden Divisionthus it is beneficial for the company to continue with CHF 300 because otherwise the Fixed costs are greater than the loss which the company is incurring while selling to the company.

The Graubunden division should purchase from the outside because the company will be able to contribute from the 75000 from the alternative use rather than incurring the loss of 10000.

If the outsider's price drops to CHF 270 then Graubunden must not purchase from the outsiders. It will reduce the benefits of the company as whole because overall costs of the company will be increased because of the fixed costs of CHF 90000.

10-A3 Transfer Pricing

Graubunden Division must purchase from outside because the loss margin has been reduced by CHF 8. Initially the company has been CHF 310. But now it is selling at 325 and the cost is 327 thus the losses will be reduced as compared to CHF 300, the price paid by Graubunden division ...