NUBD 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.
NUBD 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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What would be the gross margin for FPD if it accepted the transfer price that will be charged by CD?
Transcribed Image Text:NUBD 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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