Question

The Molding Division of Cotwold Company manufactures a plastc casing used by the Assembly Division. This casing is also soid to extermal customers for $39 per unt Variable costs for the casing are $26 per unit and foxed cost is $6 per unit Cetwid enecutives would lke for the Molding Division to transfer 2.000 units to the Assembly Division at a price of S33 per unit Assume that the Molding Division has enough excess capacity to accommodate the request Required: 1. Should the Molding Division accept the $33 transfer price proposed by management? Yes ONo 2. Calculate the effect on Molding Division's net income if it accepts the $33 transfer price Net Income

Answer 1

Particulars	Amount ($)
Sales	39
Variable Cost	33
Contribution	6
Fixed Cost	6
Profit	0
1. Should the Molding Division accept the $33 transfer price proposed by management?
No.
Because if the Molding Division Accept the $33 Transfer price Proposed by Management Accepted at the price of no profit no loss
2. Calculate the effect on Molding Division's net income if it accepts the $33 transfer price.
Net Income
$	22000