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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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
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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