Lansing Electronics Inc. manufactures a variety of printers, scanners, and fax machines in its two divisions: the PSF Division and the Components Division. The Components Division produces electronic components that can be used by the PSF Division. All the components this division produces can be sold to outside customers; however, from the beginning, nearly 90 percent of its output has been used internally. The current policy requires that all internal transfers of components be transferred at full cost. Recently, Cam DeVonn, the chief executive officer of Lansing Electronics, decided to investigate the transfer pricing policy. He was concerned that the current method of pricing internal transfers might force decisions by divisional managers that would be suboptimal for the firm. As part of his inquiry, he gathered some information concerning Component Y34, which is used by the PSF Division in its production of a basic scanner, Model SC67. The PSF Division sells 40,000 units of Model SC67 each year at a unit price of $42. Given current market conditions, this is the maximum price that the division can charge for Model SC67. The cost of manufacturing the scanner follows:
Component Y34 …………. $ 6.50
Direct materials ………….. 12.50
Direct labor ………………. 3.00
Variable overhead ……….. 1.00
Fixed overhead …………… 15.00
Total unit cost …………….$38.00
The scanner is produced efficiently, and no further reduction in manufacturing costs is possible. The manager of the Components Division indicated that she could sell 40,000 units (the division’s capacity for this part) of Component Y34 to outside buyers at $12 per unit. The PSF Division could also buy the part for $12 from external suppliers. She supplied the following details on the manufacturing cost of the component:
Direct materials …………….$2.50
Direct labor ………………… 0.50
Variable overhead ………….. 1.00
Fixed overhead …………….. 2.50
Total unit cost ………………$6.50
Required:
1. Compute the firmwide contribution margin associated with Component Y34 and Model SC67. Also, compute the contribution margin earned by each division.
2. Suppose that Cam DeVonn abolishes the current transfer pricing policy and gives divisions autonomy in setting transfer prices. Can you predict what transfer price the manager of the Components Division will set? What should be the minimum transfer price for this part? The maximum transfer price?
3. Given the new transfer pricing policy, predict how this will affect the production decision of the PSF Division manager for Model SC67. How many units of Component Y34 will the manager of the PSF Division purchase, either internally or externally?
4. Given the new transfer price set by the Components Division and your answer to Requirement 3, how many units of Y34 will be sold externally?
5. Given your answers to Requirements 3 and 4, compute the firmwide contribution margin. What has happened? Was Cam’s decision to grant additional decentralization good or bad?
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Lanning Process How Do These Factors Impact The Planning Process What Role Does
/in Uncategorized /by developerWhat are three factors that impact the planning process? How do these factors impact the planning process? What role does organization responsibility and ethics play in the planning process?
Factors that affect planning process of a business are current economic conditions,priorities, budget, organizational responsibilities and ethics.Financial support is always a major concern for…
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Lansing Electronics Inc Manufactures A Variety Of Printers Scanners And Fax Mach
/in Uncategorized /by developerLansing Electronics Inc. manufactures a variety of printers, scanners, and fax machines in its two divisions: the PSF Division and the Components Division. The Components Division produces electronic components that can be used by the PSF Division. All the components this division produces can be sold to outside customers; however, from the beginning, nearly 90 percent of its output has been used internally. The current policy requires that all internal transfers of components be transferred at full cost. Recently, Cam DeVonn, the chief executive officer of Lansing Electronics, decided to investigate the transfer pricing policy. He was concerned that the current method of pricing internal transfers might force decisions by divisional managers that would be suboptimal for the firm. As part of his inquiry, he gathered some information concerning Component Y34, which is used by the PSF Division in its production of a basic scanner, Model SC67. The PSF Division sells 40,000 units of Model SC67 each year at a unit price of $42. Given current market conditions, this is the maximum price that the division can charge for Model SC67. The cost of manufacturing the scanner follows:
Component Y34 …………. $ 6.50
Direct materials ………….. 12.50
Direct labor ………………. 3.00
Variable overhead ……….. 1.00
Fixed overhead …………… 15.00
Total unit cost …………….$38.00
The scanner is produced efficiently, and no further reduction in manufacturing costs is possible. The manager of the Components Division indicated that she could sell 40,000 units (the division’s capacity for this part) of Component Y34 to outside buyers at $12 per unit. The PSF Division could also buy the part for $12 from external suppliers. She supplied the following details on the manufacturing cost of the component:
Direct materials …………….$2.50
Direct labor ………………… 0.50
Variable overhead ………….. 1.00
Fixed overhead …………….. 2.50
Total unit cost ………………$6.50
Required:
1. Compute the firmwide contribution margin associated with Component Y34 and Model SC67. Also, compute the contribution margin earned by each division.
2. Suppose that Cam DeVonn abolishes the current transfer pricing policy and gives divisions autonomy in setting transfer prices. Can you predict what transfer price the manager of the Components Division will set? What should be the minimum transfer price for this part? The maximum transfer price?
3. Given the new transfer pricing policy, predict how this will affect the production decision of the PSF Division manager for Model SC67. How many units of Component Y34 will the manager of the PSF Division purchase, either internally or externally?
4. Given the new transfer price set by the Components Division and your answer to Requirement 3, how many units of Y34 will be sold externally?
5. Given your answers to Requirements 3 and 4, compute the firmwide contribution margin. What has happened? Was Cam’s decision to grant additional decentralization good or bad?
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Lansing Should Not Be Permitted To Continue This Practice For Several Reasons Fi
/in Uncategorized /by developerLansing should not be permitted to continue this practice for several reasons. First, it distorts the quarterly earnings for both the division and the company. The distortions of the division’s quarterly earnings are troubling because the manipulations may mask real signs of trouble. The distortions of the company’s quarterly earnings are troubling because they may mislead external users of the financial statements. Second, Lansing should not be rewarded for manipulating earnings. This sets a moral tone in the company that is likely to lead to even deeper trouble. Indeed, the permissive attitude of top management toward the manipulation of earnings may indicate the existence of other, even more serious, ethical problems in the company. Third, a clear message should be sent to division managers like Lansing that their job is to manage their operations, not their earnings. If they keep on top of operations and manage well, the earnings should take care of themselves.
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Large Cap S Hame509 How To Identify Measure And Incorporate Into Capital Budgeti
/in Uncategorized /by developerInstructions:
You are required to participate meaningfully in the discussions in this course.
Begin by looking (Links to an external site.)at the table of beta values for real companies shown here. Study these values and think about what they mean. Do any of the values surprise you, given the industry they are associated with?
Create a post comparing two or more companies based on their beta values, and discuss whether these values are surprising or consistent with what you would expect. Given the beta values, what sort of return rates do you expect these companies to offer?
Read through your classmates’ posts. We encourage you to respond to at least one of them. You might provide the published return rates for companies already under discussion, as well as other information and opinion. Or you might begin a comparison of two new companies, tying it to the earlier post.
Here is a selection of Large Cap stock betas for us to look at and discuss. These come from ABG Analytics as of 02/21/2014 (this is not an endorsement in any form for this company or website).
Stock betas are based on weekly returns over the past 250 weeks. The market return is measured using the capitalization-weighted S&P 500 index of large-cap stocks. The second and more novel beta estimate is a time-varying beta which reflects recent market conditions and stock price behavior. Changes over time in the characteristics of a company which affect the way its stock price covaries with the overall market become reflected in the time-varying beta estimates.
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Large Group Of Orthopedic Doctors Is Considering Adding Rehabilitative Services
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Large Organizations With The Help Of Computer Technology Collect Vast Sums Of Pe
/in Uncategorized /by developerLarge organizations with the help of computer technology collect vast sums of personal information from every one of us. Government agencies have collected increasingly large amounts of personal data from us in recent years — but perhaps more troubling is the even greater amount of data being collected by private companies. You may have noticed that the banner advertisements on your computer screen are customized to cater to your particular interests. This is because companies like Google collect information about you as you serf the internet. Some businesses maintain a record of every keystroke you make on company computers — and track your movements with video cameras.
Question: Is the right to privacy rapidly becoming a thing of the past? If so, what are the consequences for individuals and for society?
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Large Regions Of Dna Molecules Code For Proteins Which Leave The Vicinity Of The
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Larkspur Inc Issues 1 00 Million 10 Year 9 Bonds At98 With Interest Payable Each
/in Uncategorized /by developerLarkspur, Inc. issues $1.00 million, 10-year, 9% bonds at 98, with interest payable each January 1.
Prepare the journal entry to record the sale of these bonds on January 1, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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