Alsation Ltd

question 89

Essay

Alsation Ltd.has two divisions:.The Machining Division prepares the raw materials into component parts, and the Assembly Division assembles the components into finished product.No inventories exist in either division at the beginning of the year.During the year the Machining Division prepared 80,000 square metres of sheet metal at a cost of $480,000.All production was transferred to the Assembly Division where the metal was converted into 80,000 units of finished product at an additional costs of $5 per unit.The 80,000 units were sold for $2,000,000.Required:
a.Determine the operating income for each division if the transfer price from Machining to Assembly is at cost.
b.Determine the operating income for each division if the transfer price is $5/square metre.
c.Since the Machining Division has all of its sales internally to the Assembly Division, does the manager care what price is selected? Why? Should the Machining Division be a cost centre or a profit centre under the circumstances?

Determine the factors affecting bond duration and price volatility.

Calculate and interpret Macaulay and modified durations for various bonds.

Analyze the impact of yield to maturity, coupon rate, and time to maturity on bond duration.

Identify strategies for managing interest-rate risk through bond duration.

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Definitions:

Total Output

The total quantity of goods or services produced by a firm, industry, or economy in a specific period.

Marginal Cost

The change in total cost that arises when the quantity produced is incremented by one unit.

Average Total Cost

The total cost of production divided by the total quantity produced, representing the cost per unit of output.

Average Variable Cost

The per-unit variable cost of production, calculated by dividing total variable costs by the quantity of output produced.