DesMoines Valley Company Has Two Divisions, Computer Services and Consultancy

question 6

Essay

DesMoines Valley Company has two divisions, Computer Services and Consultancy Services. In addition to their external customers, each division performs work for the other division. The external fees earned by each division in 20X5 were $200,000 for Computer Services and $350,000 for Consultancy Services. Computer Services worked 3,000 hours for Consultancy Services, who, in turn, worked 1,200 hours for Computer Services. The total costs of external services performed by Computer Services were $110,000 and $240,000 by Consultancy Services.
Required:
a.Determine the operating income for each division and for the company as a whole if the transfer price from Computer Services to Consultancy Services is $15 per hour and the transfer price from Consultancy Services to Computer Services is $12.50 per hour.
b.Determine the operating income for each division and for the company as a whole if the transfer price between divisions is $17 per hour.
c.What are the operating income results for each division and for the company as a whole if the two divisions net the hours worked for each other and charge $12.50 per hour for the one with the excess? Which division manager prefers this arrangement?

---

Definitions:

Professional Black Painter

An African American artist who engages in painting as a professional career, often exploring themes of racial identity, cultural heritage, and social justice.

Joshua Johnston

An African American portrait painter active in the late 18th and early 19th centuries, known for his work depicting both black and white subjects.

Literary Genre

A category of literary composition characterized by similarities in form, style, or subject matter.

Benjamin Banneker

An African American almanac author, surveyor, naturalist, and farmer known for his work on early Washington D.C. city plans and for advocating civil rights in the 18th century.