Anstell Corporation operates a Manufacturing Division and a Marketing Division. Both divisions are evaluated as profit centers.Marketing buys products from Manufacturing and packages them for sale. Manufacturing sells many components to third parties inaddition to Marketing. Selected data from the two operations follow:Capacity (units)Sales price*Variable costs +Fixed costsManufacturing250,000$ 318$ 150$ 109,500a. Transfer priceb. Transfer priceMarketing125,000$948For Manufacturing, this is the price to third parties.tFor Marketing, this does not include the transfer price paid to Manufacturing.per unitper unit$ 374$ 729,500Required:a. Current output in Manufacturing is 188,000 units. Marketing requests an additional 63,000 units to produce a special order. Whattransfer price would you recommend?b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend?

In the above case Computation of Transfer Price : Transfer Price = Variable Costs Then…

Capacity (units) Sales price Variable costs + t Fixed costs * Manufacturing 250,000 $318 $ 150 $ 109,500 a. Transfer price b. Transfer price For Manufacturing, this is the price to third parties. t For Marketing, this does not include the transfer price paid to Manufacturing. Marketing 125,000 $948 $374 $ 729,500 Required: a. Current output in Manufacturing is 188,000 units. Marketing requests an additional 63,000 units to produce a special order. W transfer price would you recommend? b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend? per unit per unit

Capacity (units) Sales price Variable costs + t Fixed costs * Manufacturing 250,000 $318 $ 150 $ 109,500 a. Transfer price b. Transfer price For Manufacturing, this is the price to third parties. t For Marketing, this does not include the transfer price paid to Manufacturing. Marketing 125,000 $948 $374 $ 729,500 Required: a. Current output in Manufacturing is 188,000 units. Marketing requests an additional 63,000 units to produce a special order. W transfer price would you recommend? b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend? per unit per unit

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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