Clearview Window Company manufactures windows for the home-building industry. The window frames are produced in the Frame Division. The frames are then transferred to the Glass Division, where the glass and hardware are installed. The companys best-selling product is a three-by-four-foot, doublepaned operable window. The Frame Division also can sell frames directly to custom home builders, who install the glass and hardware. The sales price for a frame is $175. The Glass Division sells its finished windows for $420. The markets for both frames and finished windows exhibit perfect competition. The standard variable cost of the window is detailed as follows:

	Frame Division					Glass Division
Direct material		$	34				$	76	*
Direct labor			40					34
Variable overhead			76					76
Total		$	150				$	186

*Not including the transfer price for the frame.

Assume that there is no excess capacity in the Frame Division.

Required:

1-a. Use the general rule to compute the transfer price for window frames.

1-b. Calculate the transfer price if it is based on standard variable cost with a 10 percent markup.

2-a. Assume that there is excess capacity in the Frame Division. Use the general rule to compute the transfer price for window frames.

2-c. Suppose the predetermined fixed-overhead rate in the Frame Division is 125 percent of direct-labor cost. Calculate the transfer price if it is based on standard full cost plus a 10 percent markup.

2-d. The Glass Division has been approached by the U.S. Army with a special order for 1,400 windows at $361. Assume the transfer price established in requirement 2-c. above is being used.

i.What is the incremental contribution (loss) per window for Clearview Window Company as a whole if this special order is accepted?

ii.From the perspective of Clearview Window Company as a whole, should the special order be accepted or rejected?

2-e. The Glass Division has been approached by the U.S. Army with a special order for 1,400 windows at $361. Assume the transfer price established in requirement 2-c. above is being used.

i. What is the incremental contribution (loss) per window for the Glass Division if this special order is accepted?

ii.Will an autonomous Glass Division manager accept or reject the special order?