The Compressor Division has the capacity to produce 40,000 units. Its budgeted income statement for the...

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The Compressor Division has the capacity to produce 40,000 units. Its budgeted income statement for the coming year below is based on a sales volume of 32,000 units without considering Appliance Division's proposal. Ignore tax. Sales revenue $3,200,000 Manufacturing costs: Direct material Direct labor Variable overhead Fixed overhead Total manufacturing costs Gross margin Operating expenses: Variable selling Fixed selling Fixed administrative Total operating expenses Net income $384,000 $256,000 $320,000 $352,000 $1,312,000 $1,888,000 $192,000 $128,000 $224,000 $544,000 $1,344,000 The Compressor Division has the capacity to produce 40,000 units. Its budgeted income statement for the coming year below is based on a sales volume of 32,000 units without considering Appliance Division's proposal. Ignore tax. Sales revenue $3,200,000 Manufacturing costs: Direct material Direct labor Variable overhead Fixed overhead Total manufacturing costs Gross margin Operating expenses: Variable selling Fixed selling Fixed administrative Total operating expenses Net income $384,000 $256,000 $320,000 $352,000 $1,312,000 $1,888,000 $192,000 $128,000 $224,000 $544,000 $1,344,000 Required (ignore tax): a. Calculate the net income for the Appliance Division assuming it institutes the 8 percent price reduction on its refrigerator even if it cannot acquire the compressors internally for $45 per unit. Total dollars Sales revenue Variable costs Contribution margin Fixed costs Net income (loss) After 8% price reduction b. Should the Appliance Division institute the 8 percent price reduction on its refrigerator? Indicate and calculate the change in net income. O O Yes, its net income increased by No, its net income decreased by e. Suppose the Appliance Division institutes the 8 percent price reduction on its refrigerator and Gigida Company's top management has specified a transfer price of $45, would it be in the best interest of Gigida Company for the Compressor Division to supply the compressors to the Appliance Division? Indicate and calculate the change in net income. O Yes, its net income increased by No, its net income decreased by The Compressor Division has the capacity to produce 40,000 units. Its budgeted income statement for the coming year below is based on a sales volume of 32,000 units without considering Appliance Division's proposal. Ignore tax. Sales revenue $3,200,000 Manufacturing costs: Direct material Direct labor Variable overhead Fixed overhead Total manufacturing costs Gross margin Operating expenses: Variable selling Fixed selling Fixed administrative Total operating expenses Net income $384,000 $256,000 $320,000 $352,000 $1,312,000 $1,888,000 $192,000 $128,000 $224,000 $544,000 $1,344,000 The Compressor Division has the capacity to produce 40,000 units. Its budgeted income statement for the coming year below is based on a sales volume of 32,000 units without considering Appliance Division's proposal. Ignore tax. Sales revenue $3,200,000 Manufacturing costs: Direct material Direct labor Variable overhead Fixed overhead Total manufacturing costs Gross margin Operating expenses: Variable selling Fixed selling Fixed administrative Total operating expenses Net income $384,000 $256,000 $320,000 $352,000 $1,312,000 $1,888,000 $192,000 $128,000 $224,000 $544,000 $1,344,000 Required (ignore tax): a. Calculate the net income for the Appliance Division assuming it institutes the 8 percent price reduction on its refrigerator even if it cannot acquire the compressors internally for $45 per unit. Total dollars Sales revenue Variable costs Contribution margin Fixed costs Net income (loss) After 8% price reduction b. Should the Appliance Division institute the 8 percent price reduction on its refrigerator? Indicate and calculate the change in net income. O O Yes, its net income increased by No, its net income decreased by e. Suppose the Appliance Division institutes the 8 percent price reduction on its refrigerator and Gigida Company's top management has specified a transfer price of $45, would it be in the best interest of Gigida Company for the Compressor Division to supply the compressors to the Appliance Division? Indicate and calculate the change in net income. O Yes, its net income increased by No, its net income decreased by

Answer rating: 100% (QA)

a Total dollars After 8 price reduction Sales revenue 3200000 8 of 32000... View the full answer