South Sydney Consultants has two divisions: Accountancy Services and Legal Advisory Services.In addition to their external customers,each division performs work for the other division.The external fees earned by each division in 2017 were $2 000 000 for Accountancy Services and $3 500 000 for Legal Advisory Services.Accountancy Services worked 3000 hours for Legal Advisory Services,who in turn,worked 1200 hours for Accountancy Services.The total costs of external services performed by Accountancy Services were $1 100 000 and $2 400 000 by Legal Advisory Services.
Required:
a.Determine the operating profit for each division and for the company as a whole if the transfer price from Accountancy Services to Legal Advisory Services is $150 per hour and the transfer price from Legal Advisory Services to Accountancy Services is $125 per hour.
b.Determine the operating profit for each division and for the company as a whole if the transfer price between divisions is $150 per hour.
c.What are the operating profit results for each division and for the company as a whole if the two divisions net the hours worked for each other and charge $125 per hour for the one with the excess? Which division manager prefers this arrangement?
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Question

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The Answer of South Sydney Consultants has two divisions: Accountancy Services and Legal Advisory Services.In addition to their external customers,each division performs work for the other division.The external fees earned by each division in 2017 were $2 000 000 for Accountancy Services and $3 500 000 for Legal Advisory Services.Accountancy Services worked 3000 hours for Legal Advisory Services,who in turn,worked 1200 hours for Accountancy Services.The total costs of external services performed by Accountancy Services were $1 100 000 and $2 400 000 by Legal Advisory Services.
Required:
a.Determine the operating profit for each division and for the company as a whole if the transfer price from Accountancy Services to Legal Advisory Services is $150 per hour and the transfer price from Legal Advisory Services to Accountancy Services is $125 per hour.
b.Determine the operating profit for each division and for the company as a whole if the transfer price between divisions is $150 per hour.
c.What are the operating profit results for each division and for the company as a whole if the two divisions net the hours worked for each other and charge $125 per hour for the one with the excess? Which division manager prefers this arrangement?
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South Sydney Consultants Has Two Divisions: Accountancy Services and Legal