Division AA makes a product that sells externally for £50.00 per unit. It has variable production cost of £22.00 per unit, variable selling and administrative cost of £7.00 per unit, fixed production cost of £1,000,000 per year, and fixed selling and administrative cost of £500,000 per year. Production capacity is 250,000 units per year. Division AA is selling all it can produce externally at £50.00 per unit. Division BB can buy externally at £48.00 per unit. Division BB needs 30,000 units. Should a transfer take place, and if so what are the rational limits on the range of transfer prices? a. no transfer should take place b. a transfer should take place at £50 C. a transfer should take place at £48 d. a transfer should take place between £48 and £50
Division AA makes a product that sells externally for £50.00 per unit. It has variable production cost of £22.00 per unit, variable selling and administrative cost of £7.00 per unit, fixed production cost of £1,000,000 per year, and fixed selling and administrative cost of £500,000 per year. Production capacity is 250,000 units per year. Division AA is selling all it can produce externally at £50.00 per unit. Division BB can buy externally at £48.00 per unit. Division BB needs 30,000 units. Should a transfer take place, and if so what are the rational limits on the range of transfer prices? a. no transfer should take place b. a transfer should take place at £50 C. a transfer should take place at £48 d. a transfer should take place between £48 and £50
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 20E
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Question
Division AA makes a product that sells externally for £50.00 per unit. It has variable production cost of £22.00 per unit, variable selling and administrative cost of £7.00 per unit, fixed production cost of £1,000,000 per year, and fixed selling and administrative cost of £500,000 per year. Production capacity is 250,000 units per year. Division AA is selling all it can produce externally at £50.00 per unit. Division BB can buy externally at £48.00 per unit. Division BB needs 30,000 units. Should a transfer take place, and if so what are the rational limits on the range of transfer prices?
a. no transfer should take place
b. a transfer should take place at £50
C. a transfer should take place at £48
d. a transfer should take place between £48 and £50
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