Answered step by step
Verified Expert Solution
Question
00
1 Approved Answer
In Winter Company, Division A has a product that can be sold either to outside tomers or to Division 13. Winter Company uses the opportunity
In Winter Company, Division A has a product that can be sold either to outside tomers or to Division 13. Winter Company uses the opportunity cost approach to determine transfer prices. Information about these divisions is as follows Division A Capacity in units Number of units sold externally Market selling price Variable cost per unit Fixed costs per unit based on capacity Cas Case 2 100 100 50 100 $35 $52 $4 $4 59 $9 Division B Number of units needed for production 30 30 Purchase price per unit from external supplier 530 $51 Assume any joint benefit would be split evenly between the two divisions. Required: (1) Will there be any internal exchange in Case 1? If yes, determine the optimal transfer price. If no, please explain. (2) In Case 2, assume Division A can avoid $3 fee per unit if selling to Division B. Will there be any internal exchange in Case 2? If the internal exchange takes place, determine the total benefit to the firm. If no, please explain. In Winter Company vision A has a product that can be sold either to outside customers or to Division B. Water Company woes the opportunity approach to determine transces. Information about these divisions is as follows. Division A Capacity in units Market selling price Variable cost per unit Number of units sold externally Fixed costs per unit based on capacity Case 1 Case 1 100 100 50 100 $35 552 $4 $4 59 59 Division B Number of units needed for production 30 30 Purchase price per unit from external supplier $30 $51 95 Assume any joint benefit would be split evenly between the two divisions. Required: (1) Will there be any internal exchange in Case 1? If yes, determine the optimal transfer price. If no, please explain. (2) In Case 2, assume Division A can avoid $3 fee per unit if selling to Division B. Will there be any internal exchange in Case 2? If the internal exchang place. determine the total benefit to the firm. If no, please explain
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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