Greystone Corporation manufactures windows for the home building industry. The window frames are produced in the Frame Division. The frames are then transferred to the Glass Division, where the glass and hardware are installed. The company's best selling product is a three-by-four-foot, double-paned operable-windows. The standard cost of the window is detailed below: 10.12 Frame Division Glass Division P15 P30* Direct material Direct labor Variable overhead Total 20 15 30 P65 30 P75 *Not including the transfer price for the frame. The Frame Division can also sell frames directly to custom home builders, who install the glass and hardware at P80.00. The markets for both frames and finished windows exhibitt perfect competition. b. Suppose the predetermined fixed overhead rate in the Frame Division is 125 percent of direct labor cost. Calculate the transfer price if it is based on standard full cost plus a 10 percent markup. c. Assume the transfer price established in requirement 2 (b) is used. The Glass Division has been approached by the RP Army Windows at P155. From the perspective of Greystone Corporation as a whole, should the special order be accepted or rejected? Why? d. Assume the same facts as in requirement 2(c). Will an autonomous Glas Division manager accept or reject the special order? Why?
Greystone Corporation manufactures windows for the home building industry. The window frames are produced in the Frame Division. The frames are then transferred to the Glass Division, where the glass and hardware are installed. The company's best selling product is a three-by-four-foot, double-paned operable-windows. The standard cost of the window is detailed below: 10.12 Frame Division Glass Division P15 P30* Direct material Direct labor Variable overhead Total 20 15 30 P65 30 P75 *Not including the transfer price for the frame. The Frame Division can also sell frames directly to custom home builders, who install the glass and hardware at P80.00. The markets for both frames and finished windows exhibitt perfect competition. b. Suppose the predetermined fixed overhead rate in the Frame Division is 125 percent of direct labor cost. Calculate the transfer price if it is based on standard full cost plus a 10 percent markup. c. Assume the transfer price established in requirement 2 (b) is used. The Glass Division has been approached by the RP Army Windows at P155. From the perspective of Greystone Corporation as a whole, should the special order be accepted or rejected? Why? d. Assume the same facts as in requirement 2(c). Will an autonomous Glas Division manager accept or reject the special order? Why?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Answer letter c and d.
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Transcribed Image Text:Greystone Corporation manufactures windows for the home building industry, The
window frames are produced in the Frame Division. The frames are then transferred to the
Glass Division, where the glass and hardware are installed. The company's best selling product
is a three-by-four-foot, double-paned operable-windows. The standard cost of the window is
detailed below:
10.12
Frame Division Glass Division
P15
Р30*
15
Direct material
Direct labor
20
30
P75
30
Variable overhead
Total
P65
*Not including the transfer price for the frame.
The Frame Division can also sell frames directly to custom home builders, who install
the glass and hardware at P80.00. The markets for both frames and finished windows exhibit
perfect competition.
b. Suppose the predetermined fixed overhead rate in the Frame Division is 125
percent of direct labor cost. Calculate the transfer price if it is based on standard
full cost plus a 10 percent markup.
c. Assume the transfer price established in requirement 2 (b) is used. The Glass
Division has been approached by the RP Army Windows at P155. From the
perspective of Greystone Corporation as a whole, should the special order be
accepted or rejected? Why?
d. Assume the same facts as in requirement 2(c). Will an autonomous Glass
Division manager accept or reject the special order? Why?
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