Foleo Accessories has 2 manufacturing processes required to produce the car cradles, undertaken by the Electronics and Casings departments. These departments are both currently run as profit centres, so they are responsible for both their revenues and costs. The Electronics department builds the circuitry and inner workings of the cradle, which consumes $10 in variable costs per unit. The finished goods of the Electronics department are then passed through to the Casings department, who incurs an additional $6 in variable costs per unit to mould the cradle, fit the electronics and package the finished product. Once completed, the Casings department typically sells the car cradle to its end-user customers and other retailers for $30 per cradle. The Electronics department can also sell their products to an outside customer for $18 per unit. This external sale incurs an additional variable cost of $1 per unit for packaging.Question 1Not yet savedMarked out of 1.00Flag questionTipsQuestion textAssume that there is spare capacity in the Electronics department. Use the general rule to calculate the transfer price for its product.Answer text Question 1Rich text editorTransfer Price = Outlay cost per unit + Opportunity cost per unit10+0 = $10 per unit.Question 2Not yet savedMarked out of 1.00Flag questionTipsQuestion textAssume that there is no spare capacity in the Electronics department. Use the general rule to calculate the transfer price for its product.Answer text Question 2Rich text editorCM per unit= $18 - $10 - $1 = $7Transfer pricing = $10+$7 = $17Question 3Not yet savedMarked out of 8.00Flag questionTipsQuestion textThe Casings department received a special order for 4,000 car cradles at the discounted price of $25 each. While the Casings department has sufficient capacity to increase their output to accommodate the special order, the Electronics department does not have sufficient capacity to supply the additional products to Casings for this special order. To fulfill the order, Electronics has to forgo their external sales.(a) Based on the facts provided, is this special order in the best interests of Foleo Accessories? Why? (2 marks)(b) Calculate the transfer price between Electronics and Casings if it is based on variable cost plus 30%. Is it likely that the internal transfer will take place to fulfill the special order? Prove your answer with incremental analysis per unit for both internal and external sales for the Electronics department. (HINT: Compare the contribution margin between internal and external sales) (4 marks)(c) Suggest a transfer price that is acceptable to both departments. (2 marks)

The Casings department received a special order for 4,000 car cradles at the discounted price of $25 each. While the Casings department has sufficient capacity to increase their output to accommodate the special order, the Electronics department does not have sufficient capacity to supply the additional products to Casings for this special order. To fulfill the order, Electronics has to forgo their external sales.(a) Based on the facts provided, is this special order in the best interests of Foleo Accessories? Why? (2 marks)(b) Calculate the transfer price between Electronics and Casings if it is based on variable cost plus 30%. Is it likely that the internal transfer will take place to fulfill the special order? Prove your answer with incremental analysis per unit for both internal and external sales for the Electronics department. (HINT: Compare the contribution margin between internal and external sales) (4 marks)(c) Suggest a transfer price that is acceptable to both departments. (2 marks)

Tacoma Accessories makes two laptop cases, Plastic and Leather, that require direct materials, direct labor, and overhead. The following data refer to operations expected for next quarter:  Plastic Leather TotalRevenue $ 680,000 $ 700,000 $ 1,380,000Direct material 380,000 460,000 840,000Direct labor 260,000 240,000 500,000Overhead:      Material handling overhead     277,200Fabrication overhead     680,000Tacoma uses a two-stage cost allocation system: It uses direct-material costs to allocate material handling overhead and direct-labor costs to allocate fabrication overhead costs.Required:Compute the material handling overhead rate for next quarter.Compute the fabrication overhead rate for next quarter.What is the total overhead allocated to the Plastic case next quarter?What is the total overhead allocated to the Leather case next quarter?

Cheero Company produces two types of stereo units: Deluxe and Regular. For the mostrecent year, Cheero reports the following data:Budgeted manufacturing overhead $150 000Budgeted direct labour hours 50 000Actual direct labour hours 54 000Actual manufacturing overhead 250 000Deluxe RegularUnits produced 5 000 50 000Prime costs $50 000 $320 000Direct labour hours 6 000 48 000Required:a) Calculate a predetermined overhead rate based on direct labour hours.b) Calculate the unit product cost of each type of stereo unit

1. A motor manufacturer is to develop a new car model to be produced from 1 January2002 for six years until 31 December 2007. The development cost will be §33 million,of which §18 million will be incurred on 1 January 2000, §10 million on 1 July 2000and §5 million on 1 January 2001. The production cost of each car is assumed tobe incurred at the beginning of the calendar year of production and will be §9,000during 2002. The sale price of each car is assumed to be received at the end ofthe calendar year of production. Both the production costs and the sale prices areassumed to increase by 5.00% on each 1 January, the first increase occurring on 1January 2003. It is also assumed that 5,000 cars will be produced each year andthat all will be sold. The sale price of each car produced in 2002 is §12,100.(a) Calculate the discounted payback period at an effective rate of interest of 9.00%per annum.(b) Without doing any further calculations, explain whether the discounted payback period would be greater than, equal to, or less than the period calculatedin (a) if the effective rate interest were substantially less than 9.00% per annum

Tacoma Accessories makes two laptop cases, Plastic and Leather, that require direct materials, direct labor, and overhead. The following data refer to operations expected for next quarter:  Plastic Leather TotalRevenue $ 630,000 $ 650,000 $ 1,280,000Direct material 330,000 410,000 740,000Direct labor 210,000 190,000 400,000Overhead:      Material handling overhead     288,600Fabrication overhead     480,000Tacoma uses a two-stage cost allocation system: It uses direct-material costs to allocate material handling overhead and direct-labor costs to allocate fabrication overhead costs.Required:Compute the material handling overhead rate for next quarter.Compute the fabrication overhead rate for next quarter.What is the total overhead allocated to the Plastic case next quarter?What is the total overhead allocated to the Leather case next quarter?