Bedtime Bedding Company Manufactures Pillows Required:
Compute the Operating Profit for Each Division and the the Assembly

question 78

Essay

Bedtime Bedding Company manufactures pillows.The Cover Division makes covers and the Assembly Division makes the finished products.The covers can be sold separately for $5.00.The pillows sell for $6.00.The information related to manufacturing for the most recent year is as follows:
$$\begin{array} { | l | r | } \hline \text { Cover Division manufacturing costs } & \$ 6000000 \\\hline \text { Sales of covers by Cover Division } & 4000000 \\\hline \text { Market value of covers transferred to Assembly } & 6000000 \\\hline \text { Sales of pillows by Assembly Division } & 7200000 \\\hline \text { Additional manufacturing costs of Assembly Division } & 1500000 \\\hline\end{array}$$
Required:
Compute the operating profit for each division and the company as a whole.Use market value as the transfer price.Are all managers happy with this concept? Explain.
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Describe the dynamics of price setting in response to market conditions and competitor actions.

Understand the concept of price elasticity and its determinants.

Recognize the impact of brand loyalty on market dynamics and pricing strategies.

Grasp the sensitivity of demand to price changes across different products and services.

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Definitions:

Quantitative

Refers to the measurement of something in terms of quantity or amount.

Categorical

Pertaining to data that can be divided into specific groups or categories that are mutually exclusive.

Data

Collected information or facts, typically numerical, that are used as a basis for reasoning, discussion, or calculation.

Categorical Variable

A type of variable that can take on one of a limited, and usually fixed, number of possible values, assigning each individual or other unit of observation to a particular group or nominal category.