Benjamin Manufacturing Company Has Two Divisions, X and Y

question 73

Essay

Benjamin Manufacturing Company has two divisions, X and Y. Division X prepares the steel for processing. Division Y processes the steel into the final product. No inventories exist in either division at the beginning or end of 2016. During the year, Division X prepared 80,000 lbs. of steel at a cost of $800,000. All the steel was transferred to Division Y where additional operating costs of $5 per lb. were incurred. The final product was sold for $3,000,000.
Required:
a. Determine the gross profit for each division and for the company as a whole if the transfer price is $8 per lb.
b. Determine the gross profit for each division and for the company as a whole if the transfer price is $12 per lb.

---

Definitions:

Variables

Elements, features, or factors that are likely to vary or change.

Economists

Professionals who study how societies use available resources to produce valuable commodities and distribute them among different people.

Normative Statement

Describes expressions of what ought to be rather than what is, often reflecting opinions or prescriptions for policy rather than objective statements.

Legal Age

The age at which an individual is recognized by law as an adult and capable of accepting responsibility for actions.