Question
In: Accounting
Division S produces a component that is used by Division B. Division S’s costs of manufacturing...
Division S produces a component that is used by Division B. Division S’s costs of manufacturing the component is: Direct materials $30;Direct labor $8; Variable overhead $10; Fixed overhead $12 (based on a practical volume of 250,000 components). Division S also incurs these costs: fixed selling & administrative $1,200,000, and variable selling $4/unit. Division S expects to sell only 200,000 components next year. The variable selling expenses are avoidable if the component is sold internally. Division B has been buying the same component from an external supplier for $80 each. It expects to use 40,000 units of the component next year.
The manager of Division B has offered to buy 40,000 units from Division S for $56 each.
The maximum/minimum transfer price should be respectively:
a. $80/48 c. $48/48 b. $60/50 d. $38/30
Refer to question Suppose Divisions S and B agree on a transfer price of $56.
What is the benefit to each division respectively?
a. $320,000/$960,000 c. $960,000/$320,000 b. $1,280,000/$0 d. $0/$1,280,000
Solutions
ekkarill92 answered 1 year agoRelated Solutions
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$125, and unit fixed overhead of $48 at the current production
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is now trying to determine the transfer price of X....
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