Assume you are the department B manager for Marley's Manufacturing. Marley's operates under a cost-based transfer structure. Assume you receive the majority of your raw materials from department A, which sells only to department B (they have no outside sales). After calculating the operating income in dollars and operating income in percentage, analyze the following financial information to determine costs that may need further investigation. Marley's Manufacturing Income Statement Month ending August 31, 2019 Dept. A Dept. B Sales $22,000 $51,000 Cost of Goods Sold 10,560 26,520 Gross profit $
Assume you are the department B manager for Marley's Manufacturing. Marley's operates under a cost-based transfer structure. Assume you receive the majority of your raw materials from department A, which sells only to department B (they have no outside sales). After calculating the operating income in dollars and operating income in percentage, analyze the following financial information to determine costs that may need further investigation.
Marley's Manufacturing
Income Statement
Month ending August 31, 2019
| Dept. A | Dept. B | |
| Sales | $22,000 | $51,000 |
| Cost of Goods Sold | 10,560 | 26,520 |
| Gross profit | $11,440 | $24,480 |
| Utility expenses | 1,000 | 3,200 |
| Wages expense | 5,500 | 10,200 |
| Costs allocated from Corporate | 2,200 | 15,000 |
| Total expenses | $8,700 | $28,400 |
| Operating Income/(loss) $ | ? | ? |
| Operating income/(loss) % | ? | ? |
Which of these costs may need further investigation?
Why?
(Hint: It may be helpful to perform a vertical analysis)
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