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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 $29 per unit. Variable costs for the casing are $16 per unit, and fixed cost is $4 per unit. Cotwold executives would like for the Molding Division to transfer 12,000 units to the Assembly Division at a price of $20 per unit. Assume that the Molding Division has enough excess capacity to accommodate the request. Required: 1. Should the Molding Division accept the $20 transfer price proposed by management? 2. Calculate the effect on the Molding Division's net income if it accepts the $20 transfer price. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Net Income will decrease by < Required 1 Required 2 >

The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $29 per unit. Variable costs for the casing are $16 per unit, and fixed cost is $4 per unit. Cotwold executives would like for the Molding Division to transfer 12,000 units to the Assembly Division at a price of $20 per unit. Assume that the Molding Division has enough excess capacity to accommodate the request. Required: 1. Should the Molding Division accept the $20 transfer price proposed by management? 2. Calculate the effect on the Molding Division's net income if it accepts the $20 transfer price. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Net Income will decrease by < Required 1 Required 2 >

FINANCIAL ACCOUNTING
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 Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $29 per unit. Variable costs for the casing are $16 per unit, and fixed cost is $4 per unit. Cotwold executives would like for the Molding Division to transfer 12,000 units to the Assembly Division at a price of $20 per unit. Assume that the Molding Division has enough excess capacity to accommodate the request. Required: 1. Should the Molding Division accept the $20 transfer price proposed by management? 2. Calculate the effect on the Molding Division's net income if it accepts the $20 transfer price. Complete this question by entering your answers in the tabs below. Required 1 Net Income Required 2 will decrease by < Required 1 Required 2
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 $29 per unit. Variable costs for the casing are $16 per unit, and fixed cost is $4 per unit. Cotwold executives would like for the Molding Division to transfer 12,000 units to the Assembly Division at a price of $20 per unit. Assume that the Molding Division has enough excess capacity to accommodate the request. Required: 1. Should the Molding Division accept the $20 transfer price proposed by management? 2. Calculate the effect on the Molding Division's net income if it accepts the $20 transfer price. Complete this question by entering your answers in the tabs below. Required 1 Net Income Required 2 will decrease by < Required 1 Required 2
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