Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Merlin is a company of which one segment makes guns and another produces tanks. Costs for a tank produced by the Tank Division are as

Merlin is a company of which one segment makes guns and another produces tanks. Costs for a tank produced by the Tank Division are as follows: Direct material Direct labor Variable overhead Variable S&A (both for external and internal sales) Total variable cost 12 25 3 1 21 21 Fixed overhead* Fixed S&A Total fixed cost Total cost per tank Markup on total variable cost (33 1/3%) List price to external customers 3 2 5 26 7 33 Fixed costs are allocated to all units produced based on estimated annual production. Estimated annual production: 400.000 tanks Estimated sales to outside entities: 300.000 tanks Estimated sales by the Tank Division to the Spear Gun Division: 100.000 tanks The managers of the two divisions are currently negotiating a transfer price. 1. Determine a transfer price based on variable product cost and on total variable cost plus markup. 2. Tank Division has no alternative use for the facilities that make the tanks for internal transfer. Gun Division can buy equivalent tanks externally for 25. Calculate the upper and lower limits for which the transfer price should be set. and compute a transfer price that divides the profit between the two divisions equally. 3. If the Tank Division can rent the facilities in which the 100.000 tanks are produced for 100.000. Determine the lower limit of the transfer priceimage text in transcribed

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

Comparative International Accounting

Authors: Christopher Nobes, Robert Parker

14th Edition

1292296461, 978-1292296463

More Books

Students also viewed these Accounting questions

Question

How Do InformatIon SyStemS Vary By Scope?

Answered: 1 week ago

Question

14. Now reconcile what you answered to problem 15 with problem 13.

Answered: 1 week ago