Southfield Division offers its product to outside markets for $130. It incurs variable costs of $55 per unit and fixed costs of $146,500 per month based on monthly production of 23,500 units. Northfield Division can acquire the product from an alternate supplier for $135 per unit or from Southwest Division for a transfer price of $130 plus $7 per unit in transportation costs. Required: a. What are the costs and benefits of the alternatives available to Southfield Division and Northfield Division with respect to the transfer of Southfield Division's product? Assume that Southfield Division can market all that it can produce. b. How would your answer change if Southfield Division had idle capacity sufficient to cover all of Northfield Division's needs? a. Net benefit b. Net benefit per unit per unit sell/buy externally transfer internally
Southfield Division offers its product to outside markets for $130. It incurs variable costs of $55 per unit and fixed costs of $146,500 per month based on monthly production of 23,500 units. Northfield Division can acquire the product from an alternate supplier for $135 per unit or from Southwest Division for a transfer price of $130 plus $7 per unit in transportation costs. Required: a. What are the costs and benefits of the alternatives available to Southfield Division and Northfield Division with respect to the transfer of Southfield Division's product? Assume that Southfield Division can market all that it can produce. b. How would your answer change if Southfield Division had idle capacity sufficient to cover all of Northfield Division's needs? a. Net benefit b. Net benefit per unit per unit sell/buy externally transfer internally
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter14: Decentralized Operations
Section: Chapter Questions
Problem 14.18E
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