Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Pillar Division of the Gothic Building Company produces basic pillars which can be sold to outside customers or sold to the Lantern Division of

The Pillar Division of the Gothic Building Company produces basic pillars which can be sold to outside customers or sold to the Lantern Division of the Gothic Company. Last year, the Lantern Division bought all of its 25,000 pillars from Pillar at $1.75 each. The following data are available for last year's activities of the Pillar Division:


Capacity in units


335,000

pillars


Selling price per pillar to outside customers

$

2.00



Variable costs per pillar

$

1.00



Fixed costs, total

$

170,000





The total fixed costs would be the same for all the alternatives considered below.

Suppose there is ample capacity so that transfers of the pillars to the Lantern Division do not cut into sales to outside customers. What is the lowest transfer price that would not reduce the profits of the Pillar Division?

a. $ 2.75.

b. $ 1.00.

c. $ 1.75.

d. $ 2.00.

Step by Step Solution

3.46 Rating (153 Votes )

There are 3 Steps involved in it

Step: 1

b 100 Explanation Because Pillar Division has ample of cap... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Document Format ( 2 attachments)

PDF file Icon
6091806726ed7_22402.pdf

180 KBs PDF File

Word file Icon
6091806726ed7_22402.docx

120 KBs Word File

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamental Managerial Accounting Concepts

Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Old

7th edition

978-0077632427, 77632427, 78025656, 978-0078025655

More Books

Students also viewed these Accounting questions

Question

What courses does he/she teach?

Answered: 1 week ago