San Jose Company operates a Manufacturing Division and an Assembly Division. Both divisions are evaluated as profit centers. Assembly buys components from Manufacturing and assembles them for sale. Manufacturing sells many components to third parties in addition to Assembly. Selected data from the two operations follow.     Manufacturing Assembly Capacity (units)   403,000     203,000   Sales pricea $ 406   $ 1,315   Variable costsb $ 175   $ 486   Fixed costs $ 40,030,000   $ 24,030,000     a For Manufacturing, this is the price to third parties. b For Assembly, this does not include the transfer price paid to Manufacturing.   Required: a. Current production levels in Manufacturing are 203,000 units. Assembly requests an additional 43,000 units to produce a special order. What transfer price would you recommend? b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend? c. Suppose Manufacturing is operating at 381,500 units. What transfer price would you recommend? (Round your answer to 2 decimal places.)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
100%

San Jose Company operates a Manufacturing Division and an Assembly Division. Both divisions are evaluated as profit centers. Assembly buys components from Manufacturing and assembles them for sale. Manufacturing sells many components to third parties in addition to Assembly. Selected data from the two operations follow.

 

  Manufacturing Assembly
Capacity (units)   403,000     203,000  
Sales pricea $ 406   $ 1,315  
Variable costsb $ 175   $ 486  
Fixed costs $ 40,030,000   $ 24,030,000  
 

a For Manufacturing, this is the price to third parties.

b For Assembly, this does not include the transfer price paid to Manufacturing.

 

Required:

a. Current production levels in Manufacturing are 203,000 units. Assembly requests an additional 43,000 units to produce a special order. What transfer price would you recommend?

b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend?

c. Suppose Manufacturing is operating at 381,500 units. What transfer price would you recommend? (Round your answer to 2 decimal places.)

Manufacturing
403,000
Assembly
Capacity (units)
Sales pricea
Variable costsb
203,000
$
406
1,315
175
$
486
Fixed costs
$40,030,000
$24,030,000
%24
%24
%24
%24
Transcribed Image Text:Manufacturing 403,000 Assembly Capacity (units) Sales pricea Variable costsb 203,000 $ 406 1,315 175 $ 486 Fixed costs $40,030,000 $24,030,000 %24 %24 %24 %24
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Knowledge Booster
Cost classification
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education