Question

assume the small components division of Martin

P10-47A (similar to) ed Assume the Small Components Division of Martin Manufacturing produces a video card used in the assembly of a variety of electronic products Click the icon to view additional information. rte Read the requirements Requirement 1. What is the highest acceptable transfer price for the divisions? The highest O Divisions ptable transfer price for the divisions is the small components manet price s 29 Requirement 2. Assuming the transfer price is negotiated between the divisions of the company, what would be the lowest acceptable transfer price? Assume variable se only. The lowest acceptable transfer price for the division Division Small Components et he

Answer 1

Answer is given below

Highest Acceptable Transfer price Market price 2 Lowest acceptable transfer price Direct materials Direct labor Variable manufacturing costs Fixed manufacturing costs Highest acceptable transfer price 3 Manager of Small Components will prefer Manager of Computer Division will prefer 4 Transfer price Direct materials Direct labor Variable manufacturing costs Fixed manufacturing costs Full absorption cost Add: Margin of 4% Transfer price $11.00 $3.00 $2.00 $4.00 $20.00 $0.80 $20.80 Transfer price Direct materials Direct labor Variable manufacturing costs Manufacturing variable cost Add: Margin of 28% Transfer price $11.00 $3.00 $2.00 $16.00 $4.48 $20.48 $11.00 $3.00 $2.00 Transfer price Direct materials Direct labor Variable manufacturing costs Fixed manufacturing costs Variable selling expenses Total Cost Add: Margin Transfer price $4.00 $9.00 $29.00 $1.74 $30.74