Office Products Inc. manufactures and sells various high-tech office automation products.  Two divisions of Office Products Inc. are the Computer Chip Division and the Computer Division.  The Computer Chip Division manufactures one product, a “super chip,” that can be used by both the Computer Division and other external customers.  The following information is available on this month’s operations in the Computer Chip Division:             Selling price per chip                      P50     Monthly capacity                10,000 chips             Variable costs per chip                  P20     External sales                       6,000 chips             Fixed production costs            P60,000     Internal sales            0          chips             Fixed SG&A costs                   P90,000               Presently the Computer Division purchases no chips from the Computer Chips Division, but instead pays P45 to an external supplier for the 4,000 chips it needs each month. Assume that the Computer Chip Division sells 8,000 to its outside customers and Computer Division needs 4,000 units… What is the minimum Transfer price ?

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Office Products Inc. manufactures and sells various high-tech office automation products.  Two divisions of Office Products Inc. are the Computer Chip Division and the Computer Division.  The Computer Chip Division manufactures one product, a “super chip,” that can be used by both the Computer Division and other external customers.  The following information is available on this month’s operations in the Computer Chip Division:

            Selling price per chip                      P50     Monthly capacity                10,000 chips

            Variable costs per chip                  P20     External sales                       6,000 chips

            Fixed production costs            P60,000     Internal sales            0          chips

            Fixed SG&A costs                   P90,000

 

            Presently the Computer Division purchases no chips from the Computer Chips Division, but instead pays P45 to an external supplier for the 4,000 chips it needs each month.

Assume that the Computer Chip Division sells 8,000 to its outside customers and Computer Division needs 4,000 units… What is the minimum Transfer price ?

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