Simmons Bedding Company Manufactures an Array of Bedding-Related Products, Including

question 103

Essay

Simmons Bedding Company manufactures an array of bedding-related products, including pillows. The Cover Division of Simmons makes covers, while the Assembly Division of the company produces finished pillows. The covers can be sold separately for $10.00 a piece, while the pillows sell for $12.00 per unit. For performance-evaluation purposes, these two divisions are treated as investment centers. Financial results from the most recent accounting period are as follows:
Required:
1. What is the operating income for each of the two divisions and for the company as a whole? (Use market value as the transfer price.)
2. Do you think each of the two divisional managers is happy with this transfer-pricing method? Explain.

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Definitions:

DNA Synthesis

The process of constructing DNA molecules naturally or artificially through the enzyme-driven arrangement of nucleotides in a specific order.

Upstream

In genetics, refers to the sequences of DNA that are located before (5' to) the start of a gene, affecting its expression.

mRNA Sequence

A sequence of nucleotides in messenger RNA that specifies the order of amino acids in a protein.

Transcribed DNA Strand

The strand of DNA that serves as a template for RNA synthesis during the process of transcription.