The Bathtub Division of Flint Plumbing Corporation has recently approached the Faucet Division with a proposal. The Bathtub Division would like to make a special "ivory" tub with gold-plated fixtures for the company's 50-year anniversary. It would make only 5,900 of these units. It would like the Faucet Division to make the fixtures and provide them to the Bathtub Division at a transfer price of $185. If sold externally, the estimated unit variable cost would be $169. However, by selling internally, the Faucet Division would save $9 per unit on variable selling expenses. The Faucet Division is currently operating at full capacity. Its standard unit sells for $59 per unit and has variable costs of $42. Compute the minimum transfer price that the Faucet Division should be willing to accept. Minimum transfer price $ Should they accept this offer?
The Bathtub Division of Flint Plumbing Corporation has recently approached the Faucet Division with a proposal. The Bathtub Division would like to make a special "ivory" tub with gold-plated fixtures for the company's 50-year anniversary. It would make only 5,900 of these units. It would like the Faucet Division to make the fixtures and provide them to the Bathtub Division at a transfer price of $185. If sold externally, the estimated unit variable cost would be $169. However, by selling internally, the Faucet Division would save $9 per unit on variable selling expenses. The Faucet Division is currently operating at full capacity. Its standard unit sells for $59 per unit and has variable costs of $42. Compute the minimum transfer price that the Faucet Division should be willing to accept. Minimum transfer price $ Should they accept this offer?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The Bathtub Division of Flint Plumbing Corporation has recently approached the Faucet Division with a proposal. The Bathtub
Division would like to make a special "ivory" tub with gold-plated fixtures for the company's 50-year anniversary. It would make only
5,900 of these units. It would like the Faucet Division to make the fixtures and provide them to the Bathtub Division at a transfer price
of $185. If sold externally, the estimated unit variable cost would be $169. However, by selling internally, the Faucet Division would
save $9 per unit on variable selling expenses. The Faucet Division is currently operating at full capacity. Its standard unit sells for $59
per unit and has variable costs of $42.
Compute the minimum transfer price that the Faucet Division should be willing to accept.
Minimum transfer price
Should they accept this offer?
They
this offer.
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