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Nash Corporation makes backpacks, with a specialty line for baseball players. This backpack has a spot for everything-helmet, spikes, glove, and bats-and it comes
Nash Corporation makes backpacks, with a specialty line for baseball players. This backpack has a spot for everything-helmet, spikes, glove, and bats-and it comes with a hook at the top that makes it easy to hang from a chain link fence in the dugout. The backpack division buys the hooks from-you guessed it-the hook division, which has enough capacity to meet both internal and external demand. At present, the hook and backpack divisions have agreed on a transfer price of $0.75 per hook. Current volumes, costs, and prices are listed below for each division for one month. The costs for the backpack division reflect all unit backpack costs, except for the hook Hook Division Backpack Division Variable cost per unit $0.50 $18.00 Absorption cost per unit $0.75 $23.00 Market price per unit $0.90 $46.00 Quantity produced 2,100 900 Quantity sold externally 1,200 900 Quantity sold internally 900 N/A (a) Your answer is correct. According to the information given, how much gross margin would each division report for one month? How much total gross margin would the company report (before eliminating intracompany transactions)? (b) Hook division Gross margin eTextbook and Media 180 Backpack division Total 20025 $ 20205 Attempts: 3 of 5 used Assume now that the hook division could sell all of its production externally. Because of this, the hook division manager wants to renegotiate the deal with the backpack division. Explain what you believe the new negotiated transfer price will be. New transfer price $ per unit
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