Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

32. Constellation Corporation manufactures parts in Division A that are transferred to Division B for use in their product, which requires one part per

image text in transcribed

32. Constellation Corporation manufactures parts in Division A that are transferred to Division B for use in their product, which requires one part per unit. Costs are as follows: DIVISION A Variable Fixed $30 per part $400,000 DIVISION B $80 per unit + cost of parts $500,000 Division A has the capacity to produce 40,000 parts, which could sell on the market for $50 per part. Market demand is 30,000 parts. Division B has the capacity to produce 40,000 units, which could all sell on the market for $200 per unit. Division A operates in a jurisdiction with a 20% tax rate, and Division B operates in a jurisdiction with a 25% tax rate. a. Calculate the transfer price if it is based on: i. Variable cost with a 20% markup ii. Full cost with a 20% markup iii. Market price b. What range would the transfer price fall into if it were negotiated between the two divisions? c. Would the company as a whole prefer a high or low transfer price?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

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

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

Management Accounting

Authors: Pauline Weetman

2nd Edition

0273718452, 978-0273718451

More Books

Students also viewed these Accounting questions

Question

Graph each inequality or compound inequality. 5x - y > 6

Answered: 1 week ago

Question

Explain what is meant by aging of Accounts Receivable.

Answered: 1 week ago