The Micro Division of Woomera Wi-Fi Produces Micro Chips That

question 120

Essay

The Micro Division of Woomera Wi-Fi produces micro chips that are sold to the Assembly Division and to outsiders.The Micro Division produces chips that have variable costs of $6 per unit.Its 2017 sales were 150 000 to outsiders at $10 per unit and 40 000 units to the Assembly Division at 140% of variable costs.Under a dual transfer-pricing system,the Assembly Division pays only the variable cost per unit.The fixed costs of the Micro Division are $250 000 per year.
Assembly Division sells its finished products to outside customers for $23 per unit.Assembly Division has variable costs of $5.00 per unit in addition to the costs from the Micro Division.The annual fixed costs of Assembly Division were $170 000.There were no beginning or ending inventories during the year.
Required:
What are the operating profits of the two divisions and the company as a whole for the year? Explain why the company's operating profit is less than the sum of the two divisions' total profits.
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Definitions:

Outstanding Cheques

Checks that have been written and recorded in the issuing account but have not yet been cashed or deposited by the recipient.

Balance Per Bank

Balance per bank refers to the amount of money a business has in its bank account, as recorded by the bank, before reconciling any discrepancies with the company's records.

Safeguarded

refers to measures or actions taken to protect something from harm, loss, or unauthorized access.

Bank Service Charge

Fees charged by banks for account services provided, including monthly maintenance, transactions exceeding a certain limit, or ATM usage outside the network.