ZuoTi.Pro
Question

Division A makes a part that sells to customers outside of the company. Data concerning this...

Division A makes a part that sells to customers outside of the company. Data concerning this part appear below:

Selling price to outside customers $75

Variable cost per unit $50

Total fixed costs $400,000

capcity in units 25,000

Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $70 per unit and would substitue the part made by Division A. Division B requires 5,00 units of the part each period. Division A can already sell all the units it can reduce on the outside market. What should be the lowest acceptable transfer price from the perspective of Division A?

a. $66

b. $16

c. $75

d. $50

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

To transfer the units to Division B, the company has to reduce its outside sales. Which tells that there is no excess capacity.

Because there is no excess capacity in Division A, It should not accept any transfer price less than the selling price it makes to customers. which is $75

So, Lowest acceptable transfer price from the perspective of Division A is $75

So, $75 is transfer price.

0 0
Add a comment
Know the answer?
Add Answer to:
Division A makes a part that sells to customers outside of the company. Data concerning this...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Division A makes a part that it sells to customers outside of the company. Data concerning...

    Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below: Selling price to outside customers $76 Variable cost per unit $52 Total fixed costs $401,000 Capacity in units $26,000 Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $70 per unit and would substitute the...

  • Division A makes a part that it sells to customers outside of the company. Data concerning...

    Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below: Selling price to outside customers $ 94 Variable cost per unit $ 60 Total fixed costs $ 704,000 Capacity in units 44,000 Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $87 per unit and...

  • The Southern Division of Barstol Company makes and sells a single product, which is a part...

    The Southern Division of Barstol Company makes and sells a single product, which is a part used in manufacturing trucks. The annual production capacity is 39,000 units and the variable cost of each unit is $50. Presently the Southern Division sells 34,000 units per year to outside customers at $60 per unit. The Northern Division of Barstol Company would like to buy 20,000 units a year from Southern to use in its production. There would be no savings in variable...

  • A corporation has a segment, Division A that sells a part on the outside market for...

    A corporation has a segment, Division A that sells a part on the outside market for $120. Its costs, based on a unit capacity of 200,000 units, are $25 variable and $45 fixed. The company has a related segment, Division B that could use the part in its own assembly operations. Division B buys the part from another supplier for $112, and it will need 40,000 units. Required: 1) Assume division A is selling 140,000 units to outside customers. From...

  • The Southern Division of Barstol Company makes and sells a single product, which is a part...

    The Southern Division of Barstol Company makes and sells a single product, which is a part used in manufacturing trucks. The annual production capacity is 32,000 units and the variable cost of each unit is $37. Presently the Southern Division sells 27,000 units per year to outside customers at $49 per unit. The Northern Division of Barstol Company would like to buy 16,000 units a year from Southern to use in its production. There would be no savings in variable...

  • Division T of Clocker Company makes a timer which it sells for $35 to outside customers....

    Division T of Clocker Company makes a timer which it sells for $35 to outside customers. The division has supplied the following data concerning the timer:   Monthly capacity 25,000 times      Variable cost per unit $18 per timer     Fixed cost per unit $5 per timer   Division S of Clocker Company is currently buying 10,000 similar timers each month from an overseas supplier at $32 each. Division S would like to acquire its timers from Division T if the price is...

  • Swallen Company has two divisions, Division X and Division Y. Division X has a production capacity...

    Swallen Company has two divisions, Division X and Division Y. Division X has a production capacity of 5,000 units of Part G20 per month. Division X sells 4,400 units of the part each month to outside customers at a contribution margin of $56 per unit. Division Y would like to buy 800 units of Part G20 each month from Division X. In determining the lowest acceptable transfer price from the perspective of the selling division, the per unit opportunity cost...

  • Division X makes a part with the following characteristics Production capacity Selling price to outside customers...

    Division X makes a part with the following characteristics Production capacity Selling price to outside customers Variable cost per unit Pixed cost, total 32,000 units $ 32 25 $107.000 Division Y of the same company would like to purchase 10,070 units each period from Division X. Division Y now purchases the part from an outside supplier at a price of $31 each. Suppose Division X has ample excess capacity to handle all of Division Y's needs without any increase in...

  • Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated...

    Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their own division’s return on investment (ROI). Assume the following information relative to the two divisions: Case 1 2 3 4 Alpha Division: Capacity in units 53,000 301,000 103,000 202,000 Number of units now being sold to outside customers 53,000 301,000 79,000 202,000 Selling price per unit to outside customers $ 99 $ 41 $ 66 $ 48 Variable costs per unit...

  • Capacity in units Selling price to outside customers on the intermediate market Variable costs per unit...

    Capacity in units Selling price to outside customers on the intermediate market Variable costs per unit Fixed costs per unit (based on capacity) 270,000 $20 $ 12 $ 9 The company has a Pump Division that could use this valve in the manufacture of one of its pumps. The Pump Division is currently purchasing 15,000 valves per year from an overseas supplier at a cost of $19 per valve 1. Assume that the Valve Division has ample idle capacity to...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT