1. Spring 20 Company has two divisions. Division A manufactures a part that sells for $90 with a variable cost of $40. Fixed cost per unit of the part is $20. Division B wants to purchase the part from Division A. What is the minimum transfer price if Division A is operating at capacity?
2.
Spring 20 Company manufactures lamps. The company expects to sell 2,000 lamps for $100 each in April and 2,400 lamps for $110 each in May. Sales are 15% cash and 85% on account. Compute the total budgeted sales for May. You must show your work for credit.
3.
Use the following to calculate the Direct Materials Cost Standard per square foot:
Direct materials cost from the supplier are $12 per square foot, net of purchase discount. Sales taxes amount to $1.00 per square foot. Freight-in amounts to $2.00 per square foot.
| 1 | Calculation of Minimum Transfer Price | |||||||||
| Variable Cost | 40 | |||||||||
| Contribution lost | 50 | |||||||||
| Transfer Price | 90 | |||||||||
| As the company is operating at full capacity minimum t/f price will include contribution margin. | ||||||||||
| 2 | Total Budgeted Sales for May | |||||||||
| 2400*110 | 264000 | |||||||||
| 3 | Direct material cost | |||||||||
| Cost from Supplier | 12 | |||||||||
| Freight | 2 | |||||||||
| Material Cost | 14 | |||||||||
| Sales tax expenses are not to be included in material cost |
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