Johnson Corp. has two divisions, Division A and Division B. Division B has asked Division A to supply it with 5,000 units of part WD26 this year to use in one of its products. Division A has the capacity to produce 25,000 units of part WD26 per year. Division A expects to sell 21,000 units of part WD26 to outside customers this year at a price of $20.00 per unit. To fill the order from Division B, Division A would have to cut back its sales to outside customers. Division A's variable manufacturing cost (direct labor + direct material + variable overhead) for part WD26 is $12.00 per unit. The variable selling cost when selling to outside customers is $2.00 per unit. This variable selling cost would not have to be incurred on sales of the parts to Division B. Q. Calculate Division A's minimum acceptable transfer price. A. $
Johnson Corp. has two divisions, Division A and Division B. Division B has asked Division A to supply it with 5,000 units of part WD26 this year to use in one of its products. Division A has the capacity to produce 25,000 units of part WD26 per year. Division A expects to sell 21,000 units of part WD26 to outside customers this year at a price of $20.00 per unit. To fill the order from Division B, Division A would have to cut back its sales to outside customers. Division A's variable manufacturing cost (direct labor + direct material + variable overhead) for part WD26 is $12.00 per unit. The variable selling cost when selling to outside customers is $2.00 per unit. This variable selling cost would not have to be incurred on sales of the parts to Division B. Q. Calculate Division A's minimum acceptable transfer price. A. $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![Johnson Corp. has two divisions, Division A and Division B. Division B has asked Division A to supply it with 5,000 units of part WD26
this year to use in one of its products. Division A has the capacity to produce 25,000 units of part WD26 per year. Division A expects to
sell 21,000 units of part WD26 to outside customers this year at a price of $20.00 per unit. To fill the order from Division B, Division A
would have to cut back its sales to outside customers. Division A's variable manufacturing cost (direct labor + direct material + variable
overhead) for part WD26 is $12.00 per unit. The variable selling cost when selling to outside customers is $2.00 per unit. This variable
selling cost would not have to be incurred on sales of the parts to Division B.
Q. Calculate Division A's minimum acceptable transfer price.
A. $](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Faae0f3f7-ef00-4878-84b9-67ab52c6e4ed%2Fa1c7cc4b-77b6-4f9f-a22c-950f0c8c04f0%2Facn085j_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Johnson Corp. has two divisions, Division A and Division B. Division B has asked Division A to supply it with 5,000 units of part WD26
this year to use in one of its products. Division A has the capacity to produce 25,000 units of part WD26 per year. Division A expects to
sell 21,000 units of part WD26 to outside customers this year at a price of $20.00 per unit. To fill the order from Division B, Division A
would have to cut back its sales to outside customers. Division A's variable manufacturing cost (direct labor + direct material + variable
overhead) for part WD26 is $12.00 per unit. The variable selling cost when selling to outside customers is $2.00 per unit. This variable
selling cost would not have to be incurred on sales of the parts to Division B.
Q. Calculate Division A's minimum acceptable transfer price.
A. $
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