The Chasis Division provides frames for the Tractor Division of a company. The standard unit costs for the Chasis Division are as follows:Direct materials$ 800Direct labor1,500Variable overhead400Fixed overhead350Market price per unit4,575What is the transfer price based on full cost plus a markup of 20 percent?

Transfer price = Full cost + (Full cost x 20%)

Answered: The Chasis Division provides frames for…

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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The Chasis Division provides frames for the Tractor Division of a company. The standard unit costs for the Chasis Division are as follows:

Direct materials	$ 800
Direct labor	1,500
Variable overhead	400
Fixed overhead	350
Market price per unit	4,575

What is the transfer price based on full cost plus a markup of 20 percent?

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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