Division AA makes a product that sells externally for £50.00 per unit. It has variable production cost of £22.00 per unit, variable selling and administrative cost of £7.00 per unit, fixed production cost of £1,000,000 per year, and fixed selling and administrative cost of £500,000 per year. Production capacity is 250,000 units per year. Division AA is selling all it can produce externally at £50.00 per unit. Division BB can buy externally at £48.00 per unit. Division BB needs 30,000 units. Should a transfer take place, and if so what are the rational limits on the range of transfer prices? a. no transfer should take place b. a transfer should take place at £50 C. a transfer should take place at £48 d. a transfer should take place between £48 and £50
Division AA makes a product that sells externally for £50.00 per unit. It has variable production cost of £22.00 per unit, variable selling and administrative cost of £7.00 per unit, fixed production cost of £1,000,000 per year, and fixed selling and administrative cost of £500,000 per year. Production capacity is 250,000 units per year. Division AA is selling all it can produce externally at £50.00 per unit. Division BB can buy externally at £48.00 per unit. Division BB needs 30,000 units. Should a transfer take place, and if so what are the rational limits on the range of transfer prices? a. no transfer should take place b. a transfer should take place at £50 C. a transfer should take place at £48 d. a transfer should take place between £48 and £50
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Division AA makes a product that sells externally for £50.00 per unit. It has variable production cost of £22.00 per unit, variable selling and administrative cost of £7.00 per unit, fixed production cost of £1,000,000 per year, and fixed selling and administrative cost of £500,000 per year. Production capacity is 250,000 units per year. Division AA is selling all it can produce externally at £50.00 per unit. Division BB can buy externally at £48.00 per unit. Division BB needs 30,000 units. Should a transfer take place, and if so what are the rational limits on the range of transfer prices?
a. no transfer should take place
b. a transfer should take place at £50
C. a transfer should take place at £48
d. a transfer should take place between £48 and £50
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 1 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![Horngren's Cost Accounting: A Managerial Emphasis…](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
![Financial and Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education