Determine minimum transfer price under different situations. E9.28 (LO 6) The machining division has a capacity of 4,000 units. Its sales and cost data are: Selling price per unit $ Variable manufacturing costs per unit Variable selling costs per unit Total fixed manufacturing overhead 100,000 160 50 10 Instructions a. The machining division currently sells 1,600 units to outside customers, and the assembly division wants to purchase 800 units from machining. If the transaction takes place, the variable selling costs per unit on the units transferred to assembly will be $0/unit, not $10/unit. What should be the transfer price in order not to affect its current profit? b. If the assembly division is currently buying from an outside supplier at $150 per unit, what will be the effect on overall company profits if internal sales for 800 units take place at the optimum transfer price?

Determine minimum transfer price under different situations. E9.28 (LO 6) The machining division has a capacity of 4,000 units. Its sales and cost data are: Selling price per unit $ Variable manufacturing costs per unit Variable selling costs per unit Total fixed manufacturing overhead 100,000 160 50 10 Instructions a. The machining division currently sells 1,600 units to outside customers, and the assembly division wants to purchase 800 units from machining. If the transaction takes place, the variable selling costs per unit on the units transferred to assembly will be $0/unit, not $10/unit. What should be the transfer price in order not to affect its current profit? b. If the assembly division is currently buying from an outside supplier at $150 per unit, what will be the effect on overall company profits if internal sales for 800 units take place at the optimum transfer price?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Sandpiper Inc. has a division that manufactures a component that sells for $165 and has a variable cost of $45. Another division of the company wants to purchase the component Fixed cost per unit of the component is $20. What is the minimum transfer price if the division is operating at capacity? OA. $165 OB. $45 OC. $20 OD. $65
Calculate minimum transfer price. E9.29 (LO 6) The national division of Nero International Company is buying 20,000 widgets from an outside supplier at $75 per unit. Nero International's overseas division, which is producing and selling widgets at full capacity (25,000 units), has the following sales and cost structure: Sales price per unit $90 Variable cost per unit 70 Fixed cost (at capacity) per unit 20 Instructions a. Determine the minimum transfer price if the national division buys 5,000 widgets from the overseas division. b. Determine the effect on overall company profits if the overseas division meets the outside supplier's price and sells the 5,000 widgets to the national division.
Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $14. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost plus assuming 22% transfer price? • Variable cost per unit $7.27 Fixed cost per unit 1.93 • Division B sales price of Component X 14.50
Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $12. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost-based transfer price? Variable cost per unit $7.48 • Fixed cost per unit 1.97 • Division B sales price of Component X 14.50
Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $14. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost plus assuming 22% transfer price? • Variable cost per unit $6.71 • Fixed cost per unit 1.03 • Division B sales price of Component X 14.50
Use the following information for the next 2 questions (8 & 9). Division X produces and sells a product to external and internal customers. Per-unit information about its operations include: Selling price per unit to external customers $250 Variable manufacturing costs per unit 115 Fixed manufacturing overhead costs per unit 70 8. If X is operating at capacity and has unlimited external customer demand, what should be the minimum transfer price? 9. If X has sufficient excess capacity to meet internal demand, what should be the minimum transfer price?
Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $12. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the full-cost-based transfer price? • Variable cost per unit $6.69 Fixed cost per unit 1.47 . Division B sales price of Component X 14,50
Zumsteg Products, Incorporated, has a Pump Division that manufactures and sells a number of products, including a standard pump. Date concerning that pump appear below: Capacity in units Selling price to outside customers Variable cost per unit Fixed cost per unit (based on capacity) 72,800 #106 70.0 $20 The company has a Pool Products Division that could use this pump in one of its products. The Pool Products Division is currently purchasing 8,800 of these pumps per year from an overseas supplier at a cost of $99 per pump. Required: Assume that the Pump Division has enough Idle capacity to handle all of the Pool Products Division's needs. What is the acceptable ange, If any, for the transfer price between the two divisions? Note: Round your answers to 1 decimal place.
E12.30) Cost-based transfer pricing: manufacturer Refer to E12.29. The assembly division's absorption cost of a component is $510, which includes $60 of applied fixed overhead costs. The transfer price has been set at $561, which is the assembly division's absorption cost plus a 10% mark-up. The electrical division has a special offer of $697.50 for its product. The electrical division incurs variable costs of $150 in addition to the transfer price for the assembly division's components. Both divisions currently have spare production capacity. Required: 1. Is the electrical division manager likely to want to accept or reject the special offer? Why? 2. Is this decision in the best interests of Electro Ltd as a whole? Explain. 3. How could the situation be remedied using the transfer price?
(Appendix 11A) Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below: $40 $30 $10,000 20,000 Selling Price to Outside Customers Variable cost per Unit Total Fixed Costs Capacity in Units Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $38 per unit and would substitute the part made by Division A. Division B requires 5,000 units of the part each period. Division A has ample capacity to produce the units for Division B without any increase in fixed costs and without cutting into sales to outside customers. If Division A sells to Division B rather than to outside customers, the variable cost per unit would be $1 lower. What should be the lowest acceptable transfer price from the perspective of Division A? Multiple Choice $40. $30. $29.
The Heating Division of Swifty International produces a heating element that it sells to its customers for $38 per unit. Its unit variable cost is $23, and its unit fixed cost is $8. Top management of Swifty International would like the Heating Division to transfer 15,400 heating units to another division within the company at a price of $31. The Heating Division is operating at full capacity. What is the minimum transfer price that the Heating Division should accept? Minimum transfer price 23
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