Comm Devices (CD) is a division of Worldwide Communications, Inc. CD produces pagers and other personal communication
Question:
Selling price of standard pager ..... $95
Variable cost of standard pager ...... $50
Additional variable cost of special pager . $30
Instructions
For each of the following independent situations, calculate the minimum transfer price, and discuss whether the internal transfer should take place or whether the Personal Communications Division should purchase the pager externally.
(a) The Personal Communications Division has offered to pay the CD Division $105 per pager. The CD Division has no available capacity. The CD Division would have to forgo sales of 10,000 pagers to existing customers in order to meet the request of the Personal Communications Division.
(b) The Personal Communications Division has offered to pay the CD Division $150 per pager. The CD Division has no available capacity. The CD Division would have to forego ales of 16,000 pagers to existing customers in order to meet the request of the Personal Communications Division.
(c) The Personal Communications Division has offered to pay the CD Division $100 per pager. The CD Division has available capacity.
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Related Book For
Managerial Accounting Tools for business decision making
ISBN: 978-1118096895
6th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
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