SawThe Stake Division of the Outdoor Lumination Company produces stakes which can be sold to outside customers or transferred to the Solar Light Division of theOutdoor Lumination Company. Last year, the Solar Light Division bought 58,000 stakes from the Stake Division. The following data are available for last year'sactivities in the Stake Division:Capacity in unitsQuantity sold to outside customersSelling price per stake to outside customersTotal variable costs per stakeFixed operating costse here to searchMultiple ChoiceIn order to sell 58,000 stakes to the Solar Light Division, the Stake Division had to give up sales of 39,875 stakes to outside customers. That is, the Stake Divisioncould sell 391,875 stakes each year to outside customers (rather than only 352,000 stakes as shown above) if it were not making sales to the Solar Light Division.What is the lowest acceptable transfer price from the viewpoint of the selling division?A$2.40O Ai410,000 stakes352,000 stakes.$3.20< Prev$ 2.40$ 220,0003 of 25Next >37°F Cloudy@447:11 AM12/12/20225

The fixed costs are not incurred for special orders. The variable cost is to be incurred for the special orders. The contribution margin is calculated as difference between sales and variable costs. SP per unit = $3.2 VC per unit = $2.4 CM per unit = SP - VC = 3.2 - 2.4 = $0.80 Number of units loss that could be sold to outside customers = 39,875 Contribution loss = 39,875 * $0.80 = $31,900 Units transferred to Solar light Division = 58,000 Contribution margin to be covered from units transferred = $31,900 CM per unit for units transferred to solar light Division = $31,900 / 58,000 = $0.55 VC per unit = $2.40 SP or transfer price = CM + VC = 2.4 + 0.55 = $2.95 Hence, lowest acceptable transfer price is calculated as $2.95.

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The Stake Division of the Outdoor Lumination Company produces stakes which can be sold to outside customers or transferred to the Solar Light Division of the Outdoor Lumination Company. Last year, the Solar Light Division bought 58,000 stakes from the Stake Division. The following data are available for last year's activities in the Stake Division: Capacity in units Quantity sold to outside customers Selling price per stake to outside customers Total variable costs per stake Fixed operating costs ere to search In order to sell 58,000 stakes to the Solar Light Division, the Stake Division had to give up sales of 39,875 stakes to outside customers. That is, the Stake Division could sell 391,875 stakes each year to outside customers (rather than only 352,000 stakes as shown above) if it were not making sales to the Solar Light Division. What is the lowest acceptable transfer price from the viewpoint of the selling division? Multiple Choice $2.40 O C . < Prev 410,000 stakes 352,000 stakes $3.20 $2.40 2 $ 220,000 3 of 25 Next > 37°F Cloudy 7:11 AM 12/12/2022

The Stake Division of the Outdoor Lumination Company produces stakes which can be sold to outside customers or transferred to the Solar Light Division of the Outdoor Lumination Company. Last year, the Solar Light Division bought 58,000 stakes from the Stake Division. The following data are available for last year's activities in the Stake Division: Capacity in units Quantity sold to outside customers Selling price per stake to outside customers Total variable costs per stake Fixed operating costs ere to search In order to sell 58,000 stakes to the Solar Light Division, the Stake Division had to give up sales of 39,875 stakes to outside customers. That is, the Stake Division could sell 391,875 stakes each year to outside customers (rather than only 352,000 stakes as shown above) if it were not making sales to the Solar Light Division. What is the lowest acceptable transfer price from the viewpoint of the selling division? Multiple Choice $2.40 O C . < Prev 410,000 stakes 352,000 stakes $3.20 $2.40 2 $ 220,000 3 of 25 Next > 37°F Cloudy 7:11 AM 12/12/2022

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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