1. Compute the minimum transfer price that Green Yard should be required to accept.2. Compute the increase (decrease) in total contribution margin for Lawn Supplies, Inc. for this transfer. Green Yard Company, a division of Lawn Supplies, Inc., produces lawn mowers. Green Yardsells lawn mowers to home improvement stores, as well as to Lawn Supplies, Inc. Thefollowing information is available for Green Yard's mowers:Fixed cost per unit $180Variable cost perunitSelling price perunit120450Lawn Supplies, Inc. can purchase comparable lawn mowers from an outside supplier for$400. In order to ensure a reliable supply, the management of Lawn Supplies, Inc. orderedGreen Yard to provide 100,000 lawn mowers per year at a transfer price of $400 per unit.Green Yard is currently operating at full capacity. It could avoid $8 per unit of variable sellingcosts by selling internally.

Transfer Price:-It is the price that one department charges from another department of the same…

Answered: Compute the minimum transfer price that…

Compute the minimum transfer price that Green Yard should be required to accept. 2. Compute the increase (decrease) in total contribution margin for Lawn Supplies, Inc. for this transfer.

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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Question

100%

1. Compute the minimum transfer price that Green Yard should be required to accept.

2. Compute the increase (decrease) in total contribution margin for Lawn Supplies, Inc. for this transfer.

Green Yard Company, a division of Lawn Supplies, Inc., produces lawn mowers. Green Yard
sells lawn mowers to home improvement stores, as well as to Lawn Supplies, Inc. The
following information is available for Green Yard's mowers:
Fixed cost per unit $180
Variable cost per
unit
Selling price per
unit
120
450
Lawn Supplies, Inc. can purchase comparable lawn mowers from an outside supplier for
$400. In order to ensure a reliable supply, the management of Lawn Supplies, Inc. ordered
Green Yard to provide 100,000 lawn mowers per year at a transfer price of $400 per unit.
Green Yard is currently operating at full capacity. It could avoid $8 per unit of variable selling
costs by selling internally.

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