1. What would be the gross margin for FPD if it accepted the transfer price that will be charged by CD? MLBB Co. operates a Component Division (CD) and Finished Product Division (FPD).Cd's annual data is shown below:Sales - external market (40,000 units x P15)Variable costsContribution marginFixed costsProfitP600,000400,000P200,000100,000P100.000The normal capacity of CD is 50,000 units. FPD needs 10,000 parts that CD canproduce at the same variable cost per unit but will change FPD full absorption cost.FPD will process these parts at a cost of P10 per unit and would be sold to outsidecustomers at P26. FPD's fixed costs are P30,000.

Variable costs P400,000 Fixed costs P100,000 Total cost (A) P500,000 Total number of units…

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gross margin for FPD if it accepted the transfer price

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

1. What would be the gross margin for FPD if it accepted the transfer price that will be charged by CD?

MLBB Co. operates a Component Division (CD) and Finished Product Division (FPD).
Cd's annual data is shown below:
Sales - external market (40,000 units x P15)
Variable costs
Contribution margin
Fixed costs
Profit
P600,000
400,000
P200,000
100,000
P100.000
The normal capacity of CD is 50,000 units. FPD needs 10,000 parts that CD can
produce at the same variable cost per unit but will change FPD full absorption cost.
FPD will process these parts at a cost of P10 per unit and would be sold to outside
customers at P26. FPD's fixed costs are P30,000.

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