Hrubec Products, INC., operates a Pulp Division that manufactures…


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Hrubec Products, INC., operates a Pulp Division that manufactures… 1 answer below » Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the production of various paper goods. Revenue and costs
associated with a ton of pulp follow: Selling price $23 Expenses: Variable $13 Fixed (based on a capacity of 102,000 tons per year) 6 19 Net operating income $4 View complete question » Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the production of various paper goods. Revenue and costs
associated with a ton of pulp follow: Selling price $23 Expenses: Variable $13 Fixed (based on a capacity of 102,000 tons per year) 6 19 Net operating income $4 Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be treated as a division of Hrubec with
full profit responsibility. The newly formed Carton Division is currently purchasing 30,000 tons of pulp per year from a supplier at a cost of
$23 per ton, less a 10% purchase discount. Hrubec’s president is anxious for the Carton Division to begin purchasing its pulp from the Pulp
Division if an acceptable transfer price can be worked out.” For Requirement 1 through 2 below, assume that the Pulp Division can sell all of its pulp to outside customers for $23 per ton. Requirement 1: (a) What is the minimum transfer price for Pulp Division? Minimum transfer price $______________ (b) What is the maximum transfer price that Carton Division is ready to pay? Maximum transfer price $_________ Requirement 2: If the Pulp Division meets the price that the Carton Division is currently paying to its supplier and sells 30,000 tons of pulp to the Carton
Division each year, what will be the effect on the profits of the Pulp Division, the Carton Division, and the company as a whole? a. Profits of the Pulp Division will decrease by $__________ b. Profits of the Carton Division will remains unchanged by $_________ c. Profits of the company as a whole will decrease by $______________ For Requirement 3 through 6 below, assume that the Pulp Division is currently selling only 62,000 tons of pulp each year to outside customers at
the stated $23 price. Requirement 3: (a) What is the minimum transfer price for Pulp Division? Minimum transfer price $___________ (b) What is the range of transfer price the manager’s of both divisions should agree? From $________ to $_______ Requirement 4: (b) How much potential profit will the Pulp Division lose if the $18 price is not met? Profit of the comapny will decrease by
$______________ Requirement 6: Refer to Requirement 4 above. Assume that due to inflexible management policies, the Carton Division is required to purchase
30,000 tons of pulp each year from the Pulp Division at $23 per ton. What will be the effect on the profits of the company as a
whole? A. The Pulp Division will have an increase in profit by $__________ B. The Carton Division will have a decrease in profit by $________ C. The company as a whole will have an increase in profit by $__________. View less » Dec 07 2013 05:09 AM

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