Problem 3 80 Francisco's Cabinet Company had the following historical accounting data per cabinet in the Construction Division: Direct materials P150 Direct labor Variable manufacturing overhead 50 Fixed Manufacturing overhead 60 Variable selling expenses 40 Fixed selling expenses 20 The Cabinets are generally transferred internally from the Construction Division to Finishing Division. They are also sold externally for P500 per cabinet. The minimum profit level accepted by the company is markup of 20 percent. 1. What would be the transfer price if Francisco's Cabinet Company uses full cost plus desired markup? a. P408.00 c. P384.00 b. P504.00 d. P336.00 2. If the negotiated price is used, Francisco's Cabinet Company's transfer price should be: a. A maximum of P340.00 c. A maximum of P460.00 b. A maximum of P420.00 d. A minimum of P280.00 3. When intermediate products have established markets and divisions are free to buy or sell outside the firm, a transfer price problem can be avoided by setting it equal to: a. variable costs c. full costs b. the market price less 10% d. the market price