Nuu-Shah-Nulth Corp. operates two divisions. Division assets for the Motor Division: $ 950,000 1,926,000 4,828,450 $7,704.450...

  

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Nuu-Shah-Nulth Corp. operates two divisions. Division assets for the Motor Division: $ 950,000 1,926,000 4,828,450 $7,704.450 Cash Inventories Property, plant, and equipment, net Total division assets The Motor Division manufactures a heavy-duty motor that can be used for midsize tools. The variable costs of manufacturing are $169 per unit and fixed manufacturing costs per unit are $23 at a level of 100,000 units of production. Of the 100,000 motors produced annually, 90,000 are sold to external customers. There is no external demand for the remaining 10,000 units. The remaining units could be used by the Chainsaw Division, but the two division managers have not been able to agree on the price at which these motors should be sold. The Chainsaw Division's manager has offered to pay $195, which is the price at which the motors can be purchased from an outside supplier. The Motor Division's manager feels that the Chainsaw Division should pay $210, which is the current sales price to external customers. The company's controller has performed an analysis of the Motor Division and has determined that if the division does not transfer to the Chainsaw Division, it can eliminate fixed costs of $50,000. The Motor Division can allocate its freed-up resources to produce a new product that is estimated to bring in an annual contribution margin of $35,800. 2. Assuming you are the manager of the Motor Division, should the transfer of the motors to the Chainsaw Division at $195 be made? a) Yes; the profit will be $174,200 more if the transfers are continued. b) No; the profit will be $210,000 more if the transfers are discontinued. c) Yes; the profit will be $224,200 more if the transfers are continued. d) No; the profit will be $260,000 more if the transfers are discontinued. 3. Assume that management decides the motors will be sold to the Chainsaw Division using a transfer price of $195. At what price should the 90,000 motors be sold to external customers to achieve a 22% return on assets for the Motor Division? a) $184.94 b) $189.45 c) $207.94 d) $210.50 Nuu-Shah-Nulth Corp. operates two divisions. Division assets for the Motor Division: $ 950,000 1,926,000 4,828,450 $7,704.450 Cash Inventories Property, plant, and equipment, net Total division assets The Motor Division manufactures a heavy-duty motor that can be used for midsize tools. The variable costs of manufacturing are $169 per unit and fixed manufacturing costs per unit are $23 at a level of 100,000 units of production. Of the 100,000 motors produced annually, 90,000 are sold to external customers. There is no external demand for the remaining 10,000 units. The remaining units could be used by the Chainsaw Division, but the two division managers have not been able to agree on the price at which these motors should be sold. The Chainsaw Division's manager has offered to pay $195, which is the price at which the motors can be purchased from an outside supplier. The Motor Division's manager feels that the Chainsaw Division should pay $210, which is the current sales price to external customers. The company's controller has performed an analysis of the Motor Division and has determined that if the division does not transfer to the Chainsaw Division, it can eliminate fixed costs of $50,000. The Motor Division can allocate its freed-up resources to produce a new product that is estimated to bring in an annual contribution margin of $35,800. 2. Assuming you are the manager of the Motor Division, should the transfer of the motors to the Chainsaw Division at $195 be made? a) Yes; the profit will be $174,200 more if the transfers are continued. b) No; the profit will be $210,000 more if the transfers are discontinued. c) Yes; the profit will be $224,200 more if the transfers are continued. d) No; the profit will be $260,000 more if the transfers are discontinued. 3. Assume that management decides the motors will be sold to the Chainsaw Division using a transfer price of $195. At what price should the 90,000 motors be sold to external customers to achieve a 22% return on assets for the Motor Division? a) $184.94 b) $189.45 c) $207.94 d) $210.50

Answer rating: 100% (QA)

2 Total fixed cost for the company at 100000 motors capacity 23motor x 100000 motors 2300000 Sales Value of 90000 external sales at 210 per motor 9000... View the full answer