Question

. The machung von has a capacity of 20,700 units and selling price per un h as variable manufacturing costs per unit of $14, variable selling costs of $7 g overhead of 78.000 current produces and sell 19.300 units to outside customers. The web de w e to buy 50 units from machining. If the t hers to the assembly division, two incur any are ng costs. The assembly vision is currently buying these units from an de company at $32 per Question 26 Say Inc. hast pertand machining a n o Assuming machining compts the minimum transfer price, what is the effect on the overall net income of the company in net income LINK TO TEXT If the its beng ordered by assembly are of a higher quality, resulting in an increase in variable costs by another 14 per unit, what is the minimum transfer price that machungwe accept? Minimum transfer

Answer 1

Please find below table useful to compute desired results: -

A B 1 Computation of Overeal Increase in Net Income 2 No. of Unit required to Assembly Department 580 3 Current Purchase cost of Assembly Department 4 Variable Manufacturing Cost of Machining Department 14 5 Net Saving per Unit as company as whole, if arrange Inhouse (=B3-B4 6 Total Increase in Net Income by =B5*B2 8 Computation of Minimum Transfer Price would be 9 Variable Manufacturing Cost of Machining Department 10 Additional Variable Cost Required 11 Minimum Transfer Price would be 14 =B9+B101

End results would be as follows: -

А B 580 32 14 18 А 1 Computation of Overeal Increase in Net Income 2 No. of Unit required to Assembly Department 3 Current Purchase cost of Assembly Department 4 Variable Manufacturing Cost of Machining Department 5 Net Saving per Unit as company as whole, if arrange Inhouse 6 Total Increase in Net Income by 7 8 Computation of Minimum Transfer Price would be 9 Variable Manufacturing Cost of Machining Department 10 Additional Variable Cost Required 11 Minimum Transfer Price would be 10,440 14 28