Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

B. The Electronic Division of MBC Company produces electronic pumps which it sells for RM40 each to outside customers. Based on normal volume of

image text in transcribed

B. The Electronic Division of MBC Company produces electronic pumps which it sells for RM40 each to outside customers. Based on normal volume of 500,000 units per period, the Electronic Division's cost per pump is RM23 for variable costs and RM6 for fixed cost. MBC has recently purchased a small company which makes automatic dishwashers. This new company is presently purchasing 100,000 pumps each year from another manufacturer. Since the Electronic Division has a capacity of 600,000 pumps per year and is now selling only 500,000 pumps to outside customers, management would like the new Dishwasher Division to begin purchasing its pumps internally. The Dishwasher Division is now paying RM40 per pump, less a 10% quantity discount. The Electronic Division could avoid RM1 per unit in variable costs on any sales to the Dishwasher Division. Required: a) Treating each division as an independent profit center, determine the acceptable transfer price. (2 marks) b) Now assume that the Pump Division is selling 600,000 pumps per year on the outside. Determine the appropriate transfer price. (3 marks)

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

Foundations of Financial Management

Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta

10th Canadian edition

1259261018, 1259261015, 978-1259024979

More Books

Students also viewed these Accounting questions

Question

=+ What are the undesirable consequences?

Answered: 1 week ago

Question

Question 2 For an n x n matrix A = form) via (aij)

Answered: 1 week ago

Question

Describe the concept of earned value. AppendixLO1

Answered: 1 week ago