Assume that Steel Division has a product that can be sold either to outside customers on an intermediate market or to Fabrication Division of the same company for use in its production process. The different divisions are evaluated based on their divisional profits. Steel Division: Capacity in units 200,000 No. of units being sold on the intermediate market 200,000 Selling price per unit on the intermediate market P90 Variable cost per unit inclusive of variable selling expense of P370 Fixed cost per unit (based on capacity) 13 Fabrication Division: No. of units needed for production 40,000 Purchase price per unit now being paid to as outside supplier P86 The appropriate transfer price should be: (Show formula and solution) a. 87 b. 86 c. 70 d. 90
Assume that Steel Division has a product that can be sold either to outside customers on an intermediate market or to Fabrication Division of the same company for use in its production process. The different divisions are evaluated based on their divisional profits.
Steel Division:
Capacity in units 200,000
No. of units being sold on the intermediate market 200,000
Selling price per unit on the intermediate market P90
Variable cost per unit inclusive of variable selling expense of P370
Fixed cost per unit (based on capacity) 13
Fabrication Division:
No. of units needed for production 40,000 Purchase price per unit now being paid to as outside supplier P86
The appropriate transfer price should be:
(Show formula and solution)
a. 87
b. 86
c. 70
d. 90
Step by step
Solved in 2 steps with 2 images
