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Division a of harkin company has the

capacity for

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4. Division A of Harkin Company has the capacity for making 3,000 motors per
month and regularly sells 1,950 motors each month to outside customers at a
contribution margin of $62 per motor. The variable cost per motor is $35.70.
Division B of Harkin Company would like to obtain 1,400 motors each month
from Division A. What should be the lowest acceptable transfer price from the
perspective of Division A?

A. $26.57
B. $51.20
C. $35.70
D. $62.00
3,000-1950=1050(Idle capacity) {1,400x35.7+(1400-1050)x62}/1400=51.2

5. Which product would be selected in a decision that involves the utilization of

a constrained resource?

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6. Degner Inc. has some material that originally cost $19,500. The material has
a scrap value of $13,300 as is, but if reworked at a cost of $2,100, it could be
sold for $14,000. What would be the incremental effect on the company's
overall profit of reworking and selling the material rather than selling it as is as
scrap?

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7. Green Company produces 1,000 parts per year, which are used in the
assembly of one of its products. The unit product cost of these parts is:

The part can be purchased from an outside supplier at $20 per unit. If the part
is purchased from the outside supplier, two thirds of the fixed manufacturing
costs can be eliminated. The annual impact on the company's net operating
4

Managerial Accounting Quiz 4

Winter, 2013

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