JD has two divisions Engines and Tractors. The Engines Division makes engines for use in JD's Tractors. The Engine Div's variable manufacturing cost is $6,200 per unit; fixed manufacturing costs are $300 per unit. The Engine Div. is currently working at 80% capacity. If the Tractor Division buys the engines on the external market, the cost is $7,000. Using the general transfer pricing rule, what is the minimum price at which the Engine Div. would sell units to the Tractor Div.

JD has two divisions Engines and Tractors. The Engines Division makes engines for use in JD's Tractors. The Engine Div's variable manufacturing cost is $6,200 per unit; fixed manufacturing costs are $300 per unit. The Engine Div. is currently working at 80% capacity. If the Tractor Division buys the engines on the external market, the cost is $7,000. Using the general transfer pricing rule, what is the minimum price at which the Engine Div. would sell units to the Tractor Div.

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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