Required information

Skip to question

$[$The following information applies to the questions displayed below.$]$

Clearview Window Company manufactures windows for the home$-$building industry. The window frames are produced in the Frame Division. The frames are then transferred to the Glass Division, where the glass and hardware are installed. The company$$s best$-$selling product is a three$-$by$-$four$-$foot, double$-$paned operable window.

The Frame Division also can sell frames directly to custom home builders, who install the glass and hardware. The sales price for a frame is $$200.$ The Glass Division sells its finished windows for $$470.$ The markets for both frames and finished windows exhibit perfect competition.

The standard variable cost of the window is detailed as follows:

Frame Division Glass Division

Direct material $ $39$ $ $71*$Footnote asterisk

Direct labor $4039$

Variable overhead $7171$

Total $ $150$ $ $181$

$*$Footnote asteriskNot including the transfer price for the frame.

$2-$a$.$ Assume that there is excess capacity in the Frame Division. Use the general rule to compute the transfer price for window frames.

$2-$c$.$ Suppose the predetermined fixed$-$overhead rate in the Frame Division is $125$ percent of direct$-$labor cost. Calculate the transfer price if it is based on standard full cost plus a $10$ percent markup.

$2-$d$.$ The Glass Division has been approached by the U$.$S$.$ Army with a special order for $1,900$ windows at $$381.$ Assume the transfer price established in requirement $2-$c$.$ above is being used.

i$.$ What is the incremental contribution $($loss$)$ per window for Clearview Window Company as a whole if this special order is accepted?

ii$.$ From the perspective of Clearview Window Company as a whole, should the special order be accepted or rejected?

$2-$e$.$ The Glass Division has been approached by the U$.$S$.$ Army with a special order for $1,900$ windows at $$381.$ Assume the transfer price established in requirement $2-$c$.$ above is being used.

i$.$ What is the incremental contribution $($loss$)$ per window for the Glass Division if this special order is accepted?

ii$.$ Will an autonomous Glass Division manager accept or reject the special order?