The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $28 per unit. Variable costs for the casing are $15 per unit and fixed cost is $3 per unit. Cotwold executives would like for the Molding Division to transfer 11,000 units to the Assembly Division at a price of $22 per unit. Assume that the Molding Division has enough excess capacity to accommodate the request.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to
external customers for $28 per unit. Variable costs for the casing are $15 per unit and fixed cost is $3 per unit. Cotwold executives
would like for the Molding Division to transfer 11,000 units to the Assembly Division at a price of $22 per unit Assume that the Molding
Division has enough excess capacity to accommodate the request.
Required:
1. Should the Molding Division accept the $22 transfer price proposed by management?
O Yes
O No
2. Calculate the effect on the Molding Division's net income if it accepts the $22 transfer price.
Net Income
will increase by
ces
< Prey
9 of 12
Next >
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14
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4.
6.
R
Transcribed Image Text:The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $28 per unit. Variable costs for the casing are $15 per unit and fixed cost is $3 per unit. Cotwold executives would like for the Molding Division to transfer 11,000 units to the Assembly Division at a price of $22 per unit Assume that the Molding Division has enough excess capacity to accommodate the request. Required: 1. Should the Molding Division accept the $22 transfer price proposed by management? O Yes O No 2. Calculate the effect on the Molding Division's net income if it accepts the $22 transfer price. Net Income will increase by ces < Prey 9 of 12 Next > e here to search 13 14 f5 Coca 4. 6. R
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