Exercise 15-29 (Algo) Evaluate Transfer Pricing System (LO 15-2) Southfield Division offers its product to outside markets for $130. It incurs variable costs of $55 per unit and fixed costs of $146,500 per month based on monthly production of 23,500 units. Northfield Division can acquire the product from an alternate supplier for $135 per unit or from Southwest Division for a transfer price of $130 plus $7 per unit in transportation costs. Required: a. What are the costs and benefits of the alternatives available to Southfield Division and Northfield Division with respect to the transfer of Southfield Division's product? Assume that Southfield Division can market all that it can produce. b. How would your answer change if Southfield Division had idle capacity sufficient to cover all of Northfield Division's needs? a. Net benefit b. Net benefit per unit per unit

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Exercise 15-29 (Algo) Evaluate Transfer Pricing System (LO 15-2)
Southfield Division offers its product to outside markets for $130. It incurs variable costs of $55 per unit and fixed costs of $146,500
per month based on monthly production of 23,500 units. Northfield Division can acquire the product from an alternate supplier for
$135 per unit or from Southwest Division for a transfer price of $130 plus $7 per unit in transportation costs.
Saved
Required:
a. What are the costs and benefits of the alternatives available to Southfield Division and Northfield Division with respect to the
transfer of Southfield Division's product? Assume that Southfield Division can market all that it can produce.
b. How would your answer change if Southfield Division had idle capacity sufficient to cover all of Northfield Division's needs?
a. Net benefit
b. Net benefit
per unit
per unit
Transcribed Image Text:Exercise 15-29 (Algo) Evaluate Transfer Pricing System (LO 15-2) Southfield Division offers its product to outside markets for $130. It incurs variable costs of $55 per unit and fixed costs of $146,500 per month based on monthly production of 23,500 units. Northfield Division can acquire the product from an alternate supplier for $135 per unit or from Southwest Division for a transfer price of $130 plus $7 per unit in transportation costs. Saved Required: a. What are the costs and benefits of the alternatives available to Southfield Division and Northfield Division with respect to the transfer of Southfield Division's product? Assume that Southfield Division can market all that it can produce. b. How would your answer change if Southfield Division had idle capacity sufficient to cover all of Northfield Division's needs? a. Net benefit b. Net benefit per unit per unit
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