Question
Division A produces a product that it sells to the outside market. It has compiled the following: Variable manufacturing cost per unit $8 Variable selling
Division A produces a product that it sells to the outside market. It has compiled the following:
Variable manufacturing cost per unit | $8 |
Variable selling costs per unit | $3 |
Total fixed manufacturing costs | $140000 |
Total fixed selling costs | $30000 |
Per unit selling price to outside buyers | $47 |
Capacity in units per year | 30000 |
1.
i)
Division B of the same company is currently buying an identical product from an outside provider for $45 per unit. It wishes to purchase 4000 units per year from Division A. Division A is currently selling 30000 units of the product per year. If the internal transfer is made, Division A will not incur any selling costs. What would be the minimum transfer price per unit that Division A would be willing to accept?
A)8
B) 9
c)45
d)47
ii)
The first step in the absorption-cost approach is to calculate the markup percentage used in setting the target selling price.
T/F ?
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