Glide Behind Corporation manufactures and sells small cargo trailers. The Wheel Division creates parts that are both sold externally and transferred internally to the Assembly Division. Variable production costs of wheel set #102 are $80, and each set sells externally for $150. What would you recommend as the internal transfer price from the Wheel Division to the Assembly Division if a competitive external market exists for wheel set #102? Would your answer change if there were no external market this component? Why? What would the transfer price be if upper management required cost plus 25 percent as the transfer price?
Glide Behind Corporation manufactures and sells small cargo trailers. The Wheel Division creates parts that are both sold externally and transferred internally to the Assembly Division. Variable production costs of wheel set #102 are $80, and each set sells externally for $150. What would you recommend as the internal transfer price from the Wheel Division to the Assembly Division if a competitive external market exists for wheel set #102? Would your answer change if there were no external market this component? Why? What would the transfer price be if upper management required cost plus 25 percent as the transfer price?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Glide Behind Corporation manufactures and sells small cargo trailers. The Wheel Division creates parts that are both sold externally and transferred internally to the Assembly Division. Variable production costs of wheel set #102 are $80, and each set sells externally for $150. What would you recommend as the internal transfer price from the Wheel Division to the Assembly Division if a competitive external market exists for wheel set #102? Would your answer change if there were no external market this component? Why? What would the transfer price be if upper management required cost plus 25 percent as the transfer price?
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