The Following Information Is Available for the Two Divisions of MAC

question 119

Essay

The following information is available for the two divisions of MAC Company:
$\begin{array}{llr} \text {Division A: } &\\ \text { Selling price to outside market } &\$55\\ \text {Standard unit\_level costs } &35\\ \text { Division B: } &\\ \text { Selling price of finished product } &\$95\\ \text { Standard unit\_level costs } &25\\\end{array}$

Division A has no excess production capacity.
Required:
a) In order to ensure the best use of the productive capacity of Division A, what transfer price should be set by Division A and what effect does this transfer price have on the overall margin for the company? Is the answer goal congruent under the general rule?
b) Should Division B accept a special order for its product if the selling price is reduced to $70. Use your answer from (a) and explain.
c) Would your answer to (b) change if Division A had excess capacity? Explain.

Recognize methods and challenges in improving equal opportunity and reducing discrimination in organizations.

Acknowledge the impact of cultural value dimensions on organizational practices and leadership styles.

Understanding the concepts and differences between the Sharpe, Treynor, and Jensen portfolio performance measures.

Grasping the preferred methods for calculating the rate of return for comparing fund managers' performance.

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Definitions:

Direct Method

A technique used in cash flow statements to present cash activities directly related to operating activities.

Investing Adjustments

Adjustments made in the accounting records related to investments in securities or fixed assets to reflect their fair values as of the financial statement date.

Indirect Method

An accounting practice used to prepare the cash flow statement, where net income is adjusted for non-cash transactions and changes in working capital to calculate cash flow from operating activities.

Net Income

The total revenue minus total expenses, representing the company's profit.