The Following Segment Reporting Statement Includes Salamander Company's Expected Results

question 91

Essay

The following segment reporting statement includes Salamander Company's expected results for the coming period:
$\begin{array}{c}\text{Salamander Company}\\\text{ Segment Reporting Statement}\\\begin{array}{lcc}&\text{Division A }&\text{Division B}\\\text { Sales A: }(10,000 \times \$ 160)&\$1,600000\\ B: (25,000 \times \$ 72) & &\$ 1,800,00 \\\text{Variable costs} &\underline{1,360,000}&\underline{900,000} \\\text{ Contribution margin} &\$240,000 &\$900,000 \\\text{Fixed costs}&\underline{160,000}&\underline{ 360,000} \\\text{Profit}&\underline{ \$80,000}&\underline{ \$540,000 }\\\end{array}\end{array}$

Included in Division A's costs are 10,000 units of a subcomponent purchased from an outside supplier for $45. The managers have recently initiated negotiations for Division B to supply the components to Division A. Division B has a total capacity of 40,000 units.
Required:
(a) Prepare a new segment reporting statement for the Salamander Company, assuming an internal transfer at the maximum transfer price.
(b) Prepare a new segment reporting statement for the Salamander Company, assuming an internal transfer at the minimum transfer price.

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Definitions:

Dealer Market

A financial market mechanism wherein buyers and sellers of securities conduct transactions through dealers who buy and sell for their own account.

Primary Market

The segment of the capital market where new securities are issued and sold to initial buyers, typically involving underwriting processes.

Liquidation Market

A market where assets are sold quickly, often at a reduced price, to convert them into cash.

Corporate Charter

A legal document issued by a government agency that establishes a corporation and outlines its rights and obligations.