Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Ballantine Corp. produces and sells expensive bicycles. It has two divisions, A and B: A produces the bicycle frame, and division B assembles the rest

Ballantine Corp. produces and sells expensive bicycles. It has two divisions, A and B: A produces the bicycle frame, and division B assembles the rest of the bicycle onto the frame. There is a market for both the frames and the final product. The following data are available for each division: Selling price for final product $280 Long-run average selling price for bicycle frame 160 Incremental cost per unit for completion in division B 170 Incremental cost per unit in division A 100 The manager of division B has made the following calculation: Selling price for final product $280 Transferred-in cost per unit (market) $160 Incremental cost per unit for completion 170 330 Contribution (loss) on product $ (50) Assume that division As maximum capacity for this product is 2,000 units per month and sales to the frame market are now 1,200 units. Assume that division A will maintain the $160 selling price indefinitely. If division B wants 900 units on an "All or None basis", what should be the minimum transfer price at which Division A is willing to supply B's order?

$100

$16

$106.67

$117.77

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

Audit And Assurance Principles And Practices In Singapore

Authors: Dr Ernest Kan

5th Edition

9814838136, 978-9814838139

More Books

Students also viewed these Accounting questions