T-Comm makes a variety of products. It is organized in two divisions, North and South. The...

Transcribed Image Text:

T-Comm makes a variety of products. It is organized in two divisions, North and South. The managers for each division are paid, in part, based on the financial performance of their divisions. The South Division normally sells to outside customers but, on occasion, also sells to the North Division. When it does, corporate policy states that the price must be cost plus 20 percent to ensure a "fair" return to the selling division. South received an order from North for 300 units. South's planned output for the year had been 1,200 units before North's order. South's capacity is 1,500 units per year. The costs for producing those 1,200 units follow. Materials Direct labor Other costs varying with output Fixed costs (do not vary with output) Total costs Total $ 122,400 51,600 40,800 492,000 706,800 Per Unit $ 102 43 34 410 $589 Required: a. If you are the manager of the South Division, what unit cost would you ask the North Division to pay? b. If you are the manager of the North Division, what unit cost would you argue you should pay? T-Comm makes a variety of products. It is organized in two divisions, North and South. The managers for each division are paid, in part, based on the financial performance of their divisions. The South Division normally sells to outside customers but, on occasion, also sells to the North Division. When it does, corporate policy states that the price must be cost plus 20 percent to ensure a "fair" return to the selling division. South received an order from North for 300 units. South's planned output for the year had been 1,200 units before North's order. South's capacity is 1,500 units per year. The costs for producing those 1,200 units follow. Materials Direct labor Other costs varying with output Fixed costs (do not vary with output) Total costs Total $ 122,400 51,600 40,800 492,000 706,800 Per Unit $ 102 43 34 410 $589 Required: a. If you are the manager of the South Division, what unit cost would you ask the North Division to pay? b. If you are the manager of the North Division, what unit cost would you argue you should pay?

Answer rating: 100% (QA)

a As the manager of the South Division to calculate the unit cost to charge the North Divisi... View the full answer