Question
A company is divided into two segments: Segment A and Segment B. Segment B wants to purchase 2,000 units of the goods produced in Segment
A company is divided into two segments: Segment A and Segment B. Segment B wants to purchase 2,000 units of the goods produced in Segment A. The company has a policy of using cost-based transfer pricing. Normally, transfer price is determined by adding a 25% increase on cost. The following costs pertain to the products produced in Segment A:
| Per Unit | Total (2,000 units) | |
| Direct Materials | $20 | |
| Direct Labor | $12 | |
| Variable Manufacturing Overhead | $14 | |
| Fixed Manufacturing Overhead | $8,000 | |
| Selling, General, and Administrative Costs | $10,000 |
Do not enter dollar signs or commas in the input boxes. Round all answers to 2 decimal places. a) What is the transfer price charged to a unit sold by Segment A to Segment B if variable cost is used as the cost base? Transfer Price: b) What is the transfer price charged to a unit sold by Segment A to Segment B if full cost is used as the cost base? Transfer Price:
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Accounting Business Reporting For Decision Making
Authors: Jacqueline Birt, Keryn Chalmers, Suzanne Maloney, Albie Brooks, Judy Oliver
6th Edition
978-0730363415, 0730363414
