Marginal cost = Variable cost Production units and Selling price Fixed cost sold to external market 40,000 units $120 per unit $65 per unit $720,000 per year Department B requires components from department A 10,000 units per year. Department B purchases components from the market at $105 per unit. Case 1 Department A has available capacity and the demand from outsider is not higher than the current demand 1.1 1.2 if Department A produces for Department B, what is the transfer cost per unit. If Department B purchases from Department A, what profit or loss for the company should be. Case 2 Department A currently uses the full capacity 2.1 what the transfer price of department A to be charged for department B? 2.2 if Department A produces and transfer to Department B at $105 per unit, what is the profit or loss of the company. Case 3 Department A has the maximum capacity at 45,000 units per year and the demand from outsider is not higher than the current demand. If Department A produces and transfers to Department B 10,000 units, what transfer price of Department A to be charged for Department B. Why?
Marginal cost = Variable cost Production units and Selling price Fixed cost sold to external market 40,000 units $120 per unit $65 per unit $720,000 per year Department B requires components from department A 10,000 units per year. Department B purchases components from the market at $105 per unit. Case 1 Department A has available capacity and the demand from outsider is not higher than the current demand 1.1 1.2 if Department A produces for Department B, what is the transfer cost per unit. If Department B purchases from Department A, what profit or loss for the company should be. Case 2 Department A currently uses the full capacity 2.1 what the transfer price of department A to be charged for department B? 2.2 if Department A produces and transfer to Department B at $105 per unit, what is the profit or loss of the company. Case 3 Department A has the maximum capacity at 45,000 units per year and the demand from outsider is not higher than the current demand. If Department A produces and transfers to Department B 10,000 units, what transfer price of Department A to be charged for Department B. Why?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
case 2 3
Transcribed Image Text:2. Information of department A is as follows
Production units and
Selling price
Fixed cost
Marginal cost =
Variable cost
sold to external market
40,000 units
$120 per unit
$65 per unit
$720,000 per year
Department B requires components from department A 10,000 units per year. Department B purchases
components from the market at $105 per unit.
Case 1
Department A has available capacity and the demand from outsider is not higher than the current
demand
if Department A produces for Department B, what is the transfer cost per unit.
If Department B purchases from Department A, what profit or loss for the company should be.
1.1
1.2
Case 2
Department A currently uses the full capacity
2.1 what the transfer price of department A to be charged for department B?
2.2 if Department A produces and transfer to Department B at $105 per unit, what is the profit or loss of
the company.
Case 3
Department A has the maximum capacity at 45,000 units per year and the demand from outsider is not
higher than the current demand. If Department A produces and transfers to Department B 10,000 units,
what transfer price of Department A to be charged for Department B. Why?
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