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Tulip Company is made up of two divisions: A and B. Division A produces a widget that Division B uses in the production of its product. Variable cost per widget is $1.45, full cost is $2 40. Comparable widgets sell on the open market for $3.10 each. Division A can produce up to 2.80 million widgets per year but is currently operating at only 50 percent capacity. Division B expects to use 140,000 widgets in the current year. Required: 1. Determine the minimum and maximum transfer prices. 2. Calculate Tulip Company's total benefit of having the widgets transferred between these divisions 3. If the transfer price is set at $1.45 per unit, determine how much profit Division A will make on the transfer. Determine how much Division B will save by not purchasing the widgets on the open market A If the

Tulip Company is made up of two divisions: A and B. Division A produces a widget that Division B uses in the production of its product. Variable cost per widget is $1.45, full cost is $2 40. Comparable widgets sell on the open market for $3.10 each. Division A can produce up to 2.80 million widgets per year but is currently operating at only 50 percent capacity. Division B expects to use 140,000 widgets in the current year. Required: 1. Determine the minimum and maximum transfer prices. 2. Calculate Tulip Company's total benefit of having the widgets transferred between these divisions 3. If the transfer price is set at $1.45 per unit, determine how much profit Division A will make on the transfer. Determine how much Division B will save by not purchasing the widgets on the open market A If the

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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Tulip Company is made up of two divisions: A and B. Division A produces a widget that Division B uses in the production of its product. Variable cost per widget is $1.45, full cost is $2.40. Comparable widgets sell on the open market for $3.10 each. Division A can produce up to 2.80 million widgets per year but is currently operating at only 50 percent capacity. Division B expects to use 140,000 widgets in the current year. Required: 1. Determine the minimum and maximum transfer prices. 2. Calculate Tulip Company's total benefit of having the widgets transferred between these divisions. 3. If the transfer price is set at $1.45 per unit, determine how much profit Division A will make on the transfer. Determine how much Division B will save by not purchasing the widgets on the open market. 4. If the transfer price is set at $3.10 per unit, determine how much profit Division A will make on the transfer. Determine how much Division B will save by not purchasing the widgets on the open market. 5. What transfer price would you recommend to split the difference? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Determine the minimum and maximum transfer prices. (Enter your answers to 2 decimal places.) Minimum Transfer Price Maximum Transfer Price Required 2 > < Prev 11 of 12 Next > nere to search f3 W
Transcribed Image Text:Tulip Company is made up of two divisions: A and B. Division A produces a widget that Division B uses in the production of its product. Variable cost per widget is $1.45, full cost is $2.40. Comparable widgets sell on the open market for $3.10 each. Division A can produce up to 2.80 million widgets per year but is currently operating at only 50 percent capacity. Division B expects to use 140,000 widgets in the current year. Required: 1. Determine the minimum and maximum transfer prices. 2. Calculate Tulip Company's total benefit of having the widgets transferred between these divisions. 3. If the transfer price is set at $1.45 per unit, determine how much profit Division A will make on the transfer. Determine how much Division B will save by not purchasing the widgets on the open market. 4. If the transfer price is set at $3.10 per unit, determine how much profit Division A will make on the transfer. Determine how much Division B will save by not purchasing the widgets on the open market. 5. What transfer price would you recommend to split the difference? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Determine the minimum and maximum transfer prices. (Enter your answers to 2 decimal places.) Minimum Transfer Price Maximum Transfer Price Required 2 > < Prev 11 of 12 Next > nere to search f3 W
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