Quinn Inc. has a number of divisions. One division, Style, makes
zippers that are used in the manufacture of boots. Another
division, LeatherStuff, makes boots that use the zippers and needs
90,000 zippers per year. Style incurs the following costs for one
zipper:
Direct materials | $0.23 |
Direct labor | $0.20 |
Variable overhead | $0.95 |
Fixed overhead | $1.32 |
Total | $2.70 |
Quinn has capacity to make 950,000 zippers per year, but due to a
soft market, only plans to produce and sell 620,000 zippers next
year. LeatherStuff currently buys zippers from an outside supplier
for $3.50 each (the same price that Style receives). Assume that
Style and LeatherStuff have agreed on a transfer price of $3.25.
What is the total benefit for Style?
a.$168,300
b.$81,000
c.$69,000
d.$243,000
e.$292,500
(Q) What is the total benefit for Style?
(Ans) Option A - $168300
Total Benefit = 90000 x $1.87 = $168300
Quinn Inc. has a number of divisions. One division, Style, makes zippers that are used in...
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