Use the following information for Exercises 10 through 12: Babcock Company manufactures fast-baking ovens in the United States at a production cost of $500 per unit and sells them to uncontrolled distributors in the United States and a wholly-owned sales subsidiary in Canada. Babcock's U.S. distributors sell the ovens to restaurants at a price of $1,000, and its Canadian subsidiary sells the ovens at a price of $1,100. Other distributors of ovens to restaurants in Canada normally earn a gross profit equal to 25 percent of selling price. Babcock's main competitor in the United States sells fast-baking ovens at an average 50 percent markup on cost. Babcock's Canadian sales subsidiary incurs operating costs, other than cost of goods sold, that average $250 per oven sold. The average operating profit margin earned by Canadian distributors of fast-baking ovens is 5 percent.
Use the following information for Exercises 10 through 12: Babcock Company manufactures fast-baking ovens in the United States at a production cost of $500 per unit and sells them to uncontrolled distributors in the United States and a wholly-owned sales subsidiary in Canada. Babcock's U.S. distributors sell the ovens to restaurants at a price of $1,000, and its Canadian subsidiary sells the ovens at a price of $1,100. Other distributors of ovens to restaurants in Canada normally earn a gross profit equal to 25 percent of selling price. Babcock's main competitor in the United States sells fast-baking ovens at an average 50 percent markup on cost. Babcock's Canadian sales subsidiary incurs operating costs, other than cost of goods sold, that average $250 per oven sold. The average operating profit margin earned by Canadian distributors of fast-baking ovens is 5 percent.
Chapter15: Choice Of Business Entity—other Considerations
Section: Chapter Questions
Problem 86IIP
Related questions
Question
![11. Which of the following would be an acceptable transfer price under the cost-plus method?
a. $700
b. $750
c. $795
d. $825
Page 397](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F41c50984-5dd8-4826-8668-3e78fe285078%2Fec2287fc-26f5-4acd-acc1-aa0e7c2feae1%2F6yfza8l_processed.png&w=3840&q=75)
Transcribed Image Text:11. Which of the following would be an acceptable transfer price under the cost-plus method?
a. $700
b. $750
c. $795
d. $825
Page 397
![Use the following information for Exercises 10 through 12: Babcock Company manufactures fast-baking ovens in the United
States at a production cost of $500 per unit and sells them to uncontrolled distributors in the United States and a wholly-owned
sales subsidiary in Canada. Babcock's U.S. distributors sell the ovens to restaurants at a price of $1,000, and its Canadian
subsidiary sells the ovens at a price of $1,100. Other distributors of ovens to restaurants in Canada normally earn a gross profit
equal to 25 percent of selling price. Babcock's main competitor in the United States sells fast-baking ovens at an average 50
percent markup on cost. Babcock's Canadian sales subsidiary incurs operating costs, other than cost of goods sold, that average
$250 per oven sold. The average operating profit margin earned by Canadian distributors of fast-baking ovens is 5 percent.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F41c50984-5dd8-4826-8668-3e78fe285078%2Fec2287fc-26f5-4acd-acc1-aa0e7c2feae1%2Fx2o8gif_processed.png&w=3840&q=75)
Transcribed Image Text:Use the following information for Exercises 10 through 12: Babcock Company manufactures fast-baking ovens in the United
States at a production cost of $500 per unit and sells them to uncontrolled distributors in the United States and a wholly-owned
sales subsidiary in Canada. Babcock's U.S. distributors sell the ovens to restaurants at a price of $1,000, and its Canadian
subsidiary sells the ovens at a price of $1,100. Other distributors of ovens to restaurants in Canada normally earn a gross profit
equal to 25 percent of selling price. Babcock's main competitor in the United States sells fast-baking ovens at an average 50
percent markup on cost. Babcock's Canadian sales subsidiary incurs operating costs, other than cost of goods sold, that average
$250 per oven sold. The average operating profit margin earned by Canadian distributors of fast-baking ovens is 5 percent.
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