Nita Corp.'s Department II is introducing a new product that will use component C. An outside supplier has quoted Department Il a price of P96 per unit. This represents the usual P100 price less a quantity discount due to the large number of Department Il's requirements. The Company has transfer price formula of: Transfer price = Variable cost per unit + Lost contribution margin per unit on outside sales. Department I has enough excess capacity to handle all of Department II's needs. For the overall interest of the company, Department I should (M)
Nita Corp.'s Department II is introducing a new product that will use component C. An outside supplier has quoted Department Il a price of P96 per unit. This represents the usual P100 price less a quantity discount due to the large number of Department Il's requirements. The Company has transfer price formula of: Transfer price = Variable cost per unit + Lost contribution margin per unit on outside sales. Department I has enough excess capacity to handle all of Department II's needs. For the overall interest of the company, Department I should (M)
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter12: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 12.16E: Product cost concept of product pricing Based on the data presented in Exercise 12-15, assume that...
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![103.Nita Corp's Department 1 produced component C that is used by OZM as a key part.
Production and sales data for component C is as follows:
Selling price per unit
Variable cost per unit
Fixed cost per unit (based on 10,000 annual capacity)
P100
36
24
Nita Corp.'s Department II is introducing a new product that will use component C. An outside
supplier has quoted Department II a price of P96 per unit. This represents the usual P100
price less a quantity discount due to the large number of Department Il's requirements.
The Company has transfer price formula of: Transfer price = Variable cost per unit + Lost
contribution margin per unit on outside sales.
Department I has enough excess capacity to handle all of Department Il's needs. For the
overall interest of the company, Department I should (M)
a. Sell to Department II at the same quoted price of P96 per unit.
b. Sell to Department II at minimum price of P60 per unit.
c. Not sell to Department II since it will lose P4 per unit.
d. Sell to Department Il at P100 per unit.
RPCPA 1096](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F75ec33f9-03a0-4d4a-bbfe-e27c39201180%2Fa8881fa4-60e2-4118-9584-28754c2d2fe4%2Fx0kx5dpx_processed.jpeg&w=3840&q=75)
Transcribed Image Text:103.Nita Corp's Department 1 produced component C that is used by OZM as a key part.
Production and sales data for component C is as follows:
Selling price per unit
Variable cost per unit
Fixed cost per unit (based on 10,000 annual capacity)
P100
36
24
Nita Corp.'s Department II is introducing a new product that will use component C. An outside
supplier has quoted Department II a price of P96 per unit. This represents the usual P100
price less a quantity discount due to the large number of Department Il's requirements.
The Company has transfer price formula of: Transfer price = Variable cost per unit + Lost
contribution margin per unit on outside sales.
Department I has enough excess capacity to handle all of Department Il's needs. For the
overall interest of the company, Department I should (M)
a. Sell to Department II at the same quoted price of P96 per unit.
b. Sell to Department II at minimum price of P60 per unit.
c. Not sell to Department II since it will lose P4 per unit.
d. Sell to Department Il at P100 per unit.
RPCPA 1096
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