Recall that Louden, Inc., has a division in Canada that makes paint. Louden has another U.S. division,

Question:

Recall that Louden, Inc., has a division in Canada that makes paint. Louden has another U.S. division, the Retail Division, that operates a chain of home improvement stores. The Retail Division would like to buy the unique, long-lasting paint from the Canadian division, since this type of paint is not currently available. Recall that the Paint Division incurs man¬

ufacturing costs of $4.60 for one gallon of paint.

The Retail Division plans to sell the paint for $24 per gallon. Normally, the Retail Di¬

vision earns a gross margin of 50% above cost of goods sold.

Required:

1. Which Section 482 method should be used to calculate the allowable transfer price?

2. Calculate the appropriate transfer price per gallon.

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Related Book For  book-img-for-question

Cost Management Accounting And Control

ISBN: 9780324002324

3rd Edition

Authors: Don R. Hansen, Maryanne M. Mowen

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