Question

I know the answers I just need detailed step-by-step instructions.               15. Colorado Furniture had...

I know the answers I just need detailed step-by-step instructions.

              15. Colorado Furniture had the following historical accounting data, per hundred board feet, concerning one of its products:

Finished shelving:

Direct materials

$30

Direct labor

16

Variable overhead

10

Fixed overhead

12

Variable selling expenses

8

Fixed selling expenses

4

The shelving is normally transferred internally from the Cutting Division to the Finishing Division. It also may be sold externally for $110 per hundred board feet. The minimum profit level accepted by the company is a markup of 20 percent. The variable selling expenses are avoidable if the shelving is sold internally.

If the negotiated price is used, Colorado Furniture's transfer price should be a

a. What is the maximum transfer price? (Ans: $110, market price)

b. What is the minimum transfer price? (Ans: $56, incremental cost)

c. If the transfer price policy is variable cost plus a 20% fee based on the cost, what is the transfer price? (Ans: $67.2)

d. If the transfer price policy is full cost plus a 20%, markup, what is the transfer price? (Ans: $96)

e. Suppose Cutting lacks enough capacity to serve both the external and internal market. What is the transfer price?

Homework Answers

Answer #1

a) The maximum transfer price can not be above the price at which shelving is sold externally (i.e market price of shelving which is $110 per hundred board feet). Therefore the maximum transfer price is $110.

b) The minimum transfer price should be equal to total variable cost of making a sinlge hundred board feet. Total variable cost is calculated as follows:-

Total Variable Cost = Direct Materials+Direct Labor+Variable Overhead

= $30+$16+$10 = $56 per hundred board feet

Thus the minimum transfer price is $56.

c) Desired Transfer Price = Total Variable cost+20% of Total Variable Cost

= $56+(20% of $56)

= $56+$11.20 = $67.20

d) Total Cost = Direct Materials+Direct Labor+Variable OH+Fixed OH+Variable Selling Exp.+Fixed Selling Exp.

= $30+$16+$10+$12+$8+$4 = $80

Desired Transfer Price = Total Cost+20% of total cost

= $80+(20% of $80)

= $80+$16 = $96

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
I know the answers I just need detailed step-by-step instructions. 16. Use the following data to...
I know the answers I just need detailed step-by-step instructions. 16. Use the following data to answer the next question: Maxim Industries Inc. Net Operating Income after Tax $1,000,000 Earnings Before Interest and Tax $1,200,000 Sources of financing Cost Debt $4,000,000 8% Equity $5,000,000 10% (risk premium) Total $9,000,000 Tax rate 40% Long-term US trasury bond rate 4% (risk-free rate) Minimum desired return 8% a.What is the EVA for Maxim Industries? (Ans: $108,000) b. What is Maxim’s Industries’ residual income?...
I know the answers I just need detailed step-by-step instructions. You are given the following information:...
I know the answers I just need detailed step-by-step instructions. You are given the following information: The Courtney Company has the following information for the Assembly Department for October 2011: Materials purchased $ 40,000 Materials used 44,000 Direct labor 30,000 Actual manufacturing overhead 56,000 Cost of goods completed and transferred to the Finishing Dept. 120,000 Overhead rate is 200 percent of direct labor costs. The Courtney Company uses a process costing system for the Assembly Department.               7a. Refer to...
Fruities Ltd has two divisions, Durian Division and Juice Division. Durian Division has an annual capacity...
Fruities Ltd has two divisions, Durian Division and Juice Division. Durian Division has an annual capacity of 10 000 units of durian juice concentrate. Juice Division's annual requirement of durian juice concentrate is 8000 units. Fruities Ltd requires that divisions should purchase inputs internally where available, and uses a cost-plus transfer price policy, where transfer price is set at variable cost plus 25 per cent. Therefore, Durian Division always satisfies the demand of the Juice Division first, before selling the...
Assume the Small Components Division of Martin Manufacturing produces a video card used in the assembly...
Assume the Small Components Division of Martin Manufacturing produces a video card used in the assembly of a variety of electronic products. The? division's manufacturing costs and variable selling expenses related to the video card are as? follows: Cost per unit Direct materials $15.00 Direct labor $7.00 Variable manufacturing overhead $11.00 Fixed manufacturing overhead (at current production level) $10.00 Variable selling expenses $3.00 The Computer Division of Martin Manufacturing can use the video card produced by the Small Components Division...
In the Bombadier Company, Division A has a product that can be sold either to outside...
In the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below: Case 1   Case 2 Division A:                               Capacity in units           100,000                 100,000     Number of units sold externally            100,000                 60,000     Market selling price    $90         $75     Variable costs per unit               73           58     Fixed costs per unit based on capacity 10           10 Division B:                               Number of units needed for production           ...
15. Vaughn Manufacturing manufactures and sells high-priced motorcycles. The Engine Division produces and sells engines to...
15. Vaughn Manufacturing manufactures and sells high-priced motorcycles. The Engine Division produces and sells engines to other motorcycle companies and internally to the Production Division. It has been decided that the Engine Division will sell 18000 units to the Production Division at 1050 a unit. The Engine Division, currently operating at capacity, has a unit sales price of $2050 and unit variable costs and fixed costs of $1050 and $1000, respectively. The Production Division is currently paying $1900 per unit...
Gutierrez Company makes various electronic products. The company is divided into a number of autonomous divisions...
Gutierrez Company makes various electronic products. The company is divided into a number of autonomous divisions that can either sell to internal units or sell externally. All divisions are located in buildings on the same piece of property. The Board Division has offered the Chip Division $22 per unit to supply it with chips for 41,000 boards. It has been purchasing these chips for $23 per unit from outside suppliers. The Chip Division receives $24.20 per unit for sales made...
Which of the following costs are always irrelevant in decision making? A. avoidable costs B. sunk...
Which of the following costs are always irrelevant in decision making? A. avoidable costs B. sunk costs C. fixed costs D. opportunity costs Lee Company's standards for the most recent period are given below. Fixed and variable manufacturing overhead costs are applied to products on the basis of machine hours. The denominator volume of machine hours is 9,000. Standard Quantity or Hours per unit Standard Price or Rate per unit Standard Cost per unit Direct Materials 3 feet $6 per...
Wilderness Products, Inc., has designed a self-inflating sleeping pad for use by backpackers and campers. The...
Wilderness Products, Inc., has designed a self-inflating sleeping pad for use by backpackers and campers. The following information is available about the new product: An investment of $1,050,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment needed in the manufacturing process. The company’s required rate of return is 12% on all investments. A standard cost card has been prepared for the sleeping pad, as shown below: Standard Quantity or Hours Standard Price or...
Prepare, in good form, a Sales Budget, and Production Budget. Please show work. I am just...
Prepare, in good form, a Sales Budget, and Production Budget. Please show work. I am just trying to make sure I have the correct answers. Balance Sheet Bottas Manufacturing, Inc. Balance Sheet December 31, 2018 ASSETS Cash $           25,711.00 Marketable securities                20,000.00 Accounts receivable             565,844.43 Inventories:    Finished goods $           86,385.60    Work in process                          0.00    Direct materials                  7,193.94                93,579.54 Total Current Assets             705,134.97 Property, plant and equipment $         844,200.00    Less: Accumulated...