Based on the attached image, answer the following questions.1. Refer to Watts Corporation. A transfer price based on full production cost would be set at ___________ per unit.2. Refer to Watts Corporation. If the Plumbing Division is operated as an autonomous investment center and its capacity is 100,000 fittings per month, the per-unit transfer price is not likely to be below.3. Refer to Watts Corporation. A transfer price based on market price would be set at ___________ per unit. While a transfer price based on variable cost will be set at ___________ per unit. Watts CorporationWatts Corporation produces various products used in the construction industry. The Plumbing Divisionproduces and sells 100,000 copper fittings each month. Relevant information for last month follows:Total sales (all external)Expenses (all on a unit base):Variable manufacturingFixed manufacturingVariable sellingFixed sellingVariable G&AFixed G&ATotal$250,000$0.50.25.30.40.15_.50$2.10Top-level managers are trying to determine how a transfer price can be set on a transfer of 10,000 ofthe copper fittings from the Plumbing Division to the Bathroom Products Division.

Transfer price refers to the method which is used for setting the price for the transactions made…

Answered: Based on the attached image, answer the…

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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Based on the attached image, answer the following questions.

1. Refer to Watts Corporation. A transfer price based on full production cost would be set at ___________ per unit.

2. Refer to Watts Corporation. If the Plumbing Division is operated as an autonomous investment center and its capacity is 100,000 fittings per month, the per-unit transfer price is not likely to be below.

3. Refer to Watts Corporation. A transfer price based on market price would be set at ___________ per unit. While a transfer price based on variable cost will be set at ___________ per unit.

Watts Corporation
Watts Corporation produces various products used in the construction industry. The Plumbing Division
produces and sells 100,000 copper fittings each month. Relevant information for last month follows:
Total sales (all external)
Expenses (all on a unit base):
Variable manufacturing
Fixed manufacturing
Variable selling
Fixed selling
Variable G&A
Fixed G&A
Total
$250,000
$0.50
.25
.30
.40
.15
_.50
$2.10
Top-level managers are trying to determine how a transfer price can be set on a transfer of 10,000 of
the copper fittings from the Plumbing Division to the Bathroom Products Division.

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