Wildhorse's tire division typically sold all of its output to the assembly division for use in its tricycle products. The market for tires was booming, though, allowing the tire division to sell its output externally for $5/tire. The assembly division would prefer to use tires produced in-house, but if it needs to purchase elsewhere, it can also purchase them for $5/tire. The tires have a variable cost of $2/tire to manufacture, or $3/tire if all absorption costs are considered. Current capacity is 5,800 tires, and the tricycle division needs 5,800 tires. How much gross margin will the tire division make by selling all of its output to the assembly division if (a) variable cost is used as the transfer price, (b) absorption cost is used as the transfer price, or (c) market price is used as the transfer price? (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Do not leave any answer field blank. Enter O for amounts.) Gross margin $ Variable cost (a) Absorption cost (b) $ Market price (c)

Wildhorse's tire division typically sold all of its output to the assembly division for use in its tricycle products. The market for tires was booming, though, allowing the tire division to sell its output externally for $5/tire. The assembly division would prefer to use tires produced in-house, but if it needs to purchase elsewhere, it can also purchase them for $5/tire. The tires have a variable cost of $2/tire to manufacture, or $3/tire if all absorption costs are considered. Current capacity is 5,800 tires, and the tricycle division needs 5,800 tires. How much gross margin will the tire division make by selling all of its output to the assembly division if (a) variable cost is used as the transfer price, (b) absorption cost is used as the transfer price, or (c) market price is used as the transfer price? (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Do not leave any answer field blank. Enter O for amounts.) Gross margin $ Variable cost (a) Absorption cost (b) $ Market price (c)

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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