Division A of Cox Company produces a part it sells to other companies. Capacity and cost data for the part are as follows: Capacity in units Selling price to outside customers Variable cost per unit $28 $9 $37 per unit O $39 per unit $36 per unit Fixed cost per unit (based on capacity) 60,000 $40 per unit Division B, another division of Cox Company, would like to buy this part from Division A. Division B is currently purchasing the part from an outside source at $38 per unit. If Division A sells to Division B, then it can avoid $1 in variable costs because sales commissions can be avoided. Assume Division A is currently operating at capacity. According to the transfer pricing guidelines, what is the lowest acceptable transfer price from the perspective of the selling division?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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