Question
Grey Inc. has many divisions that are evaluated on the basis of ROI. One division, Centra, makes boxes. A second division, Mantra, makes chocolates and
Grey Inc. has many divisions that are evaluated on the basis of ROI. One division, Centra, makes boxes. A second division, Mantra, makes chocolates and needs 80,000 boxes per year. Centra incurs the following costs for one box: Direct materials P0.35 Direct labor P0.60 Variable overhead P0.40 Fixed overhead P0.13 Total P1.48 Centra has capacity to make 700,000 boxes per year. Mantra currently buys its boxes from an outside supplier for P1.80 each (the same price that Centra receives).
Assume that the minimum profit level accepted by the company is a markup of 30 percent. What would be the transfer price if Centra uses full cost plus markup?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started