Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Asgard Farms, Inc., has a number of divisions that produce jams and jellies, condiments and glassware. The Glassware Division manufactures a variety of bottles that

Asgard Farms, Inc., has a number of divisions that produce jams and jellies, condiments and glassware. The Glassware Division
manufactures a variety of bottles that can be sold externally (to soft-drink and juice bottlers) or internally to Asgard Farm's Jams
Division. Sales and cost data on a case of 24 basic 12-ounce bottles are as follows:
During the coming year, the Glassware Division expects to sell 470,000 cases of this bottle. The Jams and Jellies Division currently
plans to buy 109,160 cases on the outside market for $2.95 each. Bella Howard, manager of the Glassware Division, approached Pal
Vining, manager of the Jams and Jellies Division, and offered to sell the 109,160 cases for $2.90 each. Bella explained to Paul that
she can avoid selling costs of $0.13 per case by selling internally and that she would split the savings by offering a $0.05 discount or
the usual price.
Required:
What is the minimum transfer price that the Glassware Division would be willing to accept? Round to the nearest cent.
$
| per unit
What is the maximum transfer price that the Jams and Jellies Division would be willing to pay? Round to the nearest cent.
$
Should an internal transfer take place?
What would be the benefit (or loss) to the firm as a whole if the internal transfer takes place? When required, round your answer to
the nearest dollar.
$
Suppose Paul knows that the Glassware Division has idle capacity. Do you think that he would agree to the transfer price of $2.90?
Suppose he counters with an offer to pay $2.41. If you were Bella, would you be interested in this price?
Suppose that Asgard Farm's policy is that all internal transfers take place at full manufacturing cost. What would the transfer price
be? Round to the nearest cent.
$
per unit
Would the transfer take place?
image text in transcribed

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_2

Step: 3

blur-text-image_3

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

Gleim CIA Review Part 2 Practice Of Internal Auditing

Authors: Irvin N. Gleim

2020 Edition

1618542648, 978-1618542649

More Books

Students also viewed these Accounting questions