Examlex

Solved

Sugar Company Has Two Divisions,Lenox and Berkshire

question 126

Essay

Sugar Company has two divisions,Lenox and Berkshire.Lenox produces an item that Berkshire could use in its production.Berkshire currently is purchasing 100,000 units from an outside supplier for $43 per unit.Lenox is currently operating at full capacity of 750,000 units and has variable costs of $28 per unit.The full cost to manufacture the unit is $35.Lenox currently sells 750,000 units at a selling price of $44 per unit.
a.What will be the effect on Sugar Company's operating profit if the transfer is made internally?
b.What will be the change in profits for Lenox if the transfer price is $40 per unit?
c.What will be the change in profits for Berkshire if the transfer price is $40 per unit?


Definitions:

Hodgkin Disease

a type of lymphoma characterized by the presence of Reed-Sternberg cells, leading to the enlargement of lymph nodes and affecting the immune system.

Exacerbation

An increase in the severity of a disease or the intensity of its symptoms.

Differentiation

The process of distinguishing between two or more things or processes based on specific characteristics.

Photodynamic Therapy

A treatment that uses special drugs, called photosensitizing agents, alongside light to kill cancer cells.

Related Questions