Clearview Window Company manufactures windows for the home-building industry. The window frames are produced in the Frame Division. The frames are then transferred to the Glass Division, where the glass and hardware are installed. The company's best-selling product is a three-by-four-foot, doublepaned operable window. The Frame Division also can sell frames directly to custom home builders, who install the glass and hardware. The sales price for a frame is $210. The Glass Division sells its finished windows for $570. The markets for both frames and finished windows exhibit perfect competition. The standard variable cost of the window is detailed as follows: Direct material Direct labor Variable overhead. Total Frame Division $49 50 81 $180 *Not including the transfer price for the frame. 1-a. Transfer price 1-b. Transfer price Glass Division $ 81* 49 81 $211 Assume that there is no excess capacity in the Frame Division. Required: 1-a. Use the general rule to compute the transfer price for window frames. 1-b. Calculate the transfer price if it is based on standard variable cost with a 10 percent markup.
Clearview Window Company manufactures windows for the home-building industry. The window frames are produced in the Frame Division. The frames are then transferred to the Glass Division, where the glass and hardware are installed. The company's best-selling product is a three-by-four-foot, doublepaned operable window. The Frame Division also can sell frames directly to custom home builders, who install the glass and hardware. The sales price for a frame is $210. The Glass Division sells its finished windows for $570. The markets for both frames and finished windows exhibit perfect competition. The standard variable cost of the window is detailed as follows: Direct material Direct labor Variable overhead. Total Frame Division $49 50 81 $180 *Not including the transfer price for the frame. 1-a. Transfer price 1-b. Transfer price Glass Division $ 81* 49 81 $211 Assume that there is no excess capacity in the Frame Division. Required: 1-a. Use the general rule to compute the transfer price for window frames. 1-b. Calculate the transfer price if it is based on standard variable cost with a 10 percent markup.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Clearview Window Company manufactures windows for the home-building industry. The window frames are produced in
the Frame Division. The frames are then transferred to the Glass Division, where the glass and hardware are installed. The
company's best-selling product is a three-by-four-foot, doublepaned operable window.
1-a.
1-b.
The Frame Division also can sell frames directly to custom home builders, who install the glass and hardware. The sales
price for a frame is $210. The Glass Division sells its finished windows for $570. The markets for both frames and finished
windows exhibit perfect competition.
The standard variable cost of the window is detailed as follows:
Direct material
Direct labor
Variable overhead
Total
Frame Division
$ 49
50
81
$180
*Not including the transfer price for the frame.
Assume that there is no excess capacity in the Frame Division.
Required:
1-a. Use the general rule to compute the transfer price for window frames.
1-b. Calculate the transfer price if it is based on standard variable cost with a 10 percent markup.
Transfer price
Transfer price
Glass Division
$ 81*
49
81
$211
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