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» Additional controls
Volume produced; quality; training.
» Personnel controls
Revenue
Cost of goods sold
Gross margin
Advertising and promotion
Research and development
Profit before tax
Income tax
Profit after tax
Transfer?
$390/ton
Paper Outside Suppliers
2. Pulp division is at full capacity. It can save $40 variable cost per ton.
Minimum TP : $140 + $220 = $360
Range of TP: $360 ≤ TP ≤ $390
Transfer internally with TP between $360 and $390
3. Pulp division is at 150,000 capacity. It can save $40 variable cost per
ton.
Minimum TP: $140 + 0 = $140
Range of TP: $140 ≤ TP ≤ $390
Transfer internally with TP between $140 and $390
TC
Sales
Revenue/
Costs VC
BEP
FC
800 1,000
Sales Volume
TC
Sales
Revenue/ New
Costs BEP VC
BEP
FC
Fixed cost:
Account Receivable $50 WIP inventory $50
Sales Revenue $50 Account Payable $50
COGS $250
Inventory $250
Buying division’s own cost:
WIP inventory (VC) $100
WIP inventory (FC) 60
To close the headquarter account (consolidation): Materials/Labor/FOH $160
Income summary $100
Head quarter $100 Sell to outside customers:
Account receivable $500
Sales Revenue $ 500
COGS $410
Inventory $410