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Wallaces Manufacturing Inc has two divisions, Division A and Division B. Division A produces car stereos that it sells to retail stores for a price of $96 per unit. Its full capacity is 273,000 units, but it currently sells 234,300 units. It incurs the following costs in its production: Direct materials $36

Wallaces Manufacturing Inc has two divisions, Division A and Division B. Division A produces car stereos that it sells to retail stores for a price of $96 per unit. Its full capacity is 273,000 units, but it currently sells 234,300 units. It incurs the following costs in its production: Direct materials $36

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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Wallaces Manufacturing Inc has two divisions, Division A and Division B. Division A produces car stereos that it sells to retail stores for a price of $96 per unit. Its full capacity is 273,000 units, but it currently sells 234,300 units. It incurs the following costs in its production: Direct materials Direct labour Variable overhead Fixed overhead (a) $36 27 15 Division B is purchasing 15,400 units of the same stereo from an outside supplier for $86 per unit. 6 Net income increase Calculate the minimum transfer price Division A is willing to accept. Minimum transfer price Determine the effect on the net income of Division A at the price determined in part a. (If an answer is zero, please enter O. Do not leave any field blank.) $ $
Transcribed Image Text:Wallaces Manufacturing Inc has two divisions, Division A and Division B. Division A produces car stereos that it sells to retail stores for a price of $96 per unit. Its full capacity is 273,000 units, but it currently sells 234,300 units. It incurs the following costs in its production: Direct materials Direct labour Variable overhead Fixed overhead (a) $36 27 15 Division B is purchasing 15,400 units of the same stereo from an outside supplier for $86 per unit. 6 Net income increase Calculate the minimum transfer price Division A is willing to accept. Minimum transfer price Determine the effect on the net income of Division A at the price determined in part a. (If an answer is zero, please enter O. Do not leave any field blank.) $ $
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