Mossfort, Inc., has a division in Canada that makes long-lasting exterior wood stain. Mossfort has another U.S. division, the Retail Division, that operates a chain of home improvement stores. The Retail Division would like to buy the unique, long-lasting wood stain from the Canadian division, since this type of stain is not currently available. The Exterior Stain Division incurs
If the Retail Division purchases the stain from the Canadian division, the shipping costs will be $1.40 per gallon, but sales commissions of $0.75 per gallon will be avoided with an internal transfer. The Retail Division plans to sell the stain for $32.80 per gallon. Normally, the Retail Division earns a gross margin of 35 percent above cost of goods sold.
Required:
- 1. Which Section 482 method should be used to calculate the allowable transfer price?
- 2. Calculate the appropriate transfer price per gallon. (Round to the nearest cent.)
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Cornerstones of Cost Management (Cornerstones Series)
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- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning