The X Division of NUBD Co. uses 5,000 motor batteries per month in its production of cars. It presently buys all of the batteries it needs from three outside suppliers at an average cost of P100. The Y Division of NUBD Co. manufactures the exact type of battery that the X Division requires. The Y Division is presently operating at its capacity of 15,000 units per month and sells all of its output to a foreign car manufacturer at P105 per unit. Its cost structure (on 15,000 units) is: Variable production costs Variable selling costs All fixed costs P75 15 10 Assume that the Y Division would not incur any variable selling costs on units that are transferred internally.
The X Division of NUBD Co. uses 5,000 motor batteries per month in its production of cars. It presently buys all of the batteries it needs from three outside suppliers at an average cost of P100. The Y Division of NUBD Co. manufactures the exact type of battery that the X Division requires. The Y Division is presently operating at its capacity of 15,000 units per month and sells all of its output to a foreign car manufacturer at P105 per unit. Its cost structure (on 15,000 units) is: Variable production costs Variable selling costs All fixed costs P75 15 10 Assume that the Y Division would not incur any variable selling costs on units that are transferred internally.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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What is the minimum of the transfer price range for a transfer between the two divisions?
Transcribed Image Text:The X Division of NUBD Co. uses 5,000 motor batteries per month in its production of
cars. It presently buys all of the batteries it needs from three outside suppliers at an
average cost of P100. The Y Division of NUBD Co. manufactures the exact type of
battery that the X Division requires. The Y Division is presently operating at its
capacity of 15,000 units per month and sells all of its output to a foreign car
manufacturer at P105 per unit. Its cost structure (on 15,000 units) is:
Variable production costs
Variable selling costs
All fixed costs
P75
15
10
Assume that the Y Division would not incur any variable selling costs on units that are
transferred internally.
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