Carol Components operates a Production Division and a Packaging Division. Both divisions are evaluated as profit centers. Packagingbuys components from Production and assembles them for sale. Production sells many components to third parties in addition toPackaging. Selected data from the two operations follow:Capacity (units)Sales priceaVariable costs bFixed costsProduction50,600$ 252$ 108$ 30,000,000a For Production, this is the price to third parties.bFor Packaging, this does not include the transfer price paid to Production.Packaging25,300$ 792$ 300$ 18,000,000Suppose Production is located in Country A with a tax rate of 30 percent and Distribution in Country B with a tax rate of 10 percent. Allother facts remain the same.a. Optimal transfer priceb. Transfer pricec. Transfer priceRequired:a. Current output in Production is 25,300 units. Packaging requests an additional 5,960 units to produce a special order. What transferprice would you recommend?b. Suppose Production is operating at full capacity. What transfer price would you recommend?c. Suppose Production is operating at 47,620 units. What transfer price would you recommend?per unitper unitper unit

The Question is based on the concept of Cost Accounting. Transfer price is the price at which the…

Required: a. Current output in Production is 25,300 units. Packaging requests an additional 5,960 units to produce a special order. What transfer price would you recommend? b. Suppose Production is operating at full capacity. What transfer price would you recommend? c. Suppose Production is operating at 47,620 units. What transfer price would you recommend? a. Optimal transfer price b. Transfer price c. Transfer price per unit per unit per unit

Required: a. Current output in Production is 25,300 units. Packaging requests an additional 5,960 units to produce a special order. What transfer price would you recommend? b. Suppose Production is operating at full capacity. What transfer price would you recommend? c. Suppose Production is operating at 47,620 units. What transfer price would you recommend? a. Optimal transfer price b. Transfer price c. Transfer price per unit per unit per unit

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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