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Determine minimum transfer price under different situations. E9.28 (LO 6) The machining division has a capacity of 4,000 units. Its sales and cost data are: Selling price per unit $ Variable manufacturing costs per unit Variable selling costs per unit Total fixed manufacturing overhead 100,000 160 50 10 Instructions a. The machining division currently sells 1,600 units to outside customers, and the assembly division wants to purchase 800 units from machining. If the transaction takes place, the variable selling costs per unit on the units transferred to assembly will be $0/unit, not $10/unit. What should be the transfer price in order not to affect its current profit? b. If the assembly division is currently buying from an outside supplier at $150 per unit, what will be the effect on overall company profits if internal sales for 800 units take place at the optimum transfer price?

Determine minimum transfer price under different situations. E9.28 (LO 6) The machining division has a capacity of 4,000 units. Its sales and cost data are: Selling price per unit $ Variable manufacturing costs per unit Variable selling costs per unit Total fixed manufacturing overhead 100,000 160 50 10 Instructions a. The machining division currently sells 1,600 units to outside customers, and the assembly division wants to purchase 800 units from machining. If the transaction takes place, the variable selling costs per unit on the units transferred to assembly will be $0/unit, not $10/unit. What should be the transfer price in order not to affect its current profit? b. If the assembly division is currently buying from an outside supplier at $150 per unit, what will be the effect on overall company profits if internal sales for 800 units take place at the optimum transfer price?

FINANCIAL ACCOUNTING
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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Determine minimum transfer price under different situations. E9.28 (LO 6) The machining division has a capacity of 4,000 units. Its sales and cost data are: Selling price per unit $ Variable manufacturing costs per unit Variable selling costs per unit Total fixed manufacturing overhead 100,000 160 50 10 Instructions a. The machining division currently sells 1,600 units to outside customers, and the assembly division wants to purchase 800 units from machining. If the transaction takes place, the variable selling costs per unit on the units transferred to assembly will be $0/unit, not $10/unit. What should be the transfer price in order not to affect its current profit? b. If the assembly division is currently buying from an outside supplier at $150 per unit, what will be the effect on overall company profits if internal sales for 800 units take place at the optimum transfer price?
Transcribed Image Text:Determine minimum transfer price under different situations. E9.28 (LO 6) The machining division has a capacity of 4,000 units. Its sales and cost data are: Selling price per unit $ Variable manufacturing costs per unit Variable selling costs per unit Total fixed manufacturing overhead 100,000 160 50 10 Instructions a. The machining division currently sells 1,600 units to outside customers, and the assembly division wants to purchase 800 units from machining. If the transaction takes place, the variable selling costs per unit on the units transferred to assembly will be $0/unit, not $10/unit. What should be the transfer price in order not to affect its current profit? b. If the assembly division is currently buying from an outside supplier at $150 per unit, what will be the effect on overall company profits if internal sales for 800 units take place at the optimum transfer price?
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