Sub Company Is a 100% Owned Subsidiary of Parent Corporation

question 12

Essay

Sub Company is a 100% owned subsidiary of Parent Corporation.During 2015,Parent sold inventory costing $500,000 to Sub for $750,000.Sub Company still had $150,000 (at transfer price)of the inventory on hand as of December 31,2015.During 2015,Parent Company reported sales of $2,250,000 and cost of goods sold of $1,500,000,while Sub Company reported sales of $1,200,000 and cost of goods sold of $1,000,000.
Required:
Determine the 2015 consolidated gross profit.

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Definitions:

Budgeting

The process of creating a plan to spend your money, outlining future financial goals and how resources will be allocated to achieve them.

Differential Costs

The difference in total cost that will result from selecting one alternative over another.

Variable

A quantity or element that is subject to change, often used in mathematical equations or experiments to represent changeable factors.

Contribution Format

A type of income statement where costs are segregated into variable and fixed categories, emphasizing cost behavior and contribution margin.