Question

Branded Shoe Company manufactures only one type of shoe and has two divisions, the Stitching Division and the PolishingDivision. The Stitching Division manufactures shoes for the Polishing Division, which completes the shoe and sells it to retailers. The Stitching Division "sells"shoesto the Polishing Division. The market price for the Polishing Division to purchase a pair of shoes is $42. (Ignore changes in inventory.)

Stitching's costs per pair of soles are:

Direct materials $10

Direct labor $ 8

Variable overhead $ 6

Division fixed costs $ 4

Polishing's costs per completed pair of shoes are:

Direct materials $14

Direct labor $ 6

Variable overhead $ 4

Division fixed costs $16

What is the market-based transfer price per pair of shoes from the Stitching Division to the Polishing Division?

A) $20

B) $32

C) $42

D) $52

What is the transfer price per pair of shoes from the Stitching Division to the Polishing Division if the method used to place a value on each pair of shoes is 180% of variable costs?

A) $18.00

B) $32.40

C) $43.20

D) $57.60

What is the transfer price per pair of shoes from the Stitching Division to the Polishing Division if the transfer price per pair of soles is 125% of full costs?

A) $12.50

B) $22.50

C) $30.00

D) $35.00

Answer #1

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