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Safe Doors manufactures doors for the home building industry. The door frames are produced in the Assembly division. Once doors are assembled, they are then
Safe Doors manufactures doors for the home building industry. The door frames are produced in the Assembly division. Once doors are assembled, they are then transferred to the Finishing division for polishing and painting. The standard cost of the door is detailed below: Assembly Division Finishing Division Direct Material $90 $180* Direct Labour 120 90 Variable Overhead Cost 180 180 Total Standard Cost $390 $450 *not including the transfer price for the Assembly. The Assembly division can also sell the door frames directly to home builders who prefer customizing their own doors. The sale price for an unpolished door is $480. The Finishing division sells it finished doors for $1140. Required: a. Assume that there is no spare capacity in the Assembly division.Use the general rule to calculate the transfer price for door frames. Howe will this answer differ if (2 marks) b. Calculate the transfer price if it is based on standard variable cost with a 12% markup. (2 marks) C. Assume that there is spare capacity in the Assembly division.Use the general rule to calculate the transfer price for door frames. (3 marks) d.Suppose that the predetermined fixed overhead rate in the Assembly division is 150% of direct labour cost. Calculate the transfer price if it is based on standard absorption cost plus a 12% markup. (2 marks) e. Assume the transfer price established in c. is used. The Finishing division has been approached by the management of a commercial construction company with a special order for 1000 doors at $930 each. From the perspective of Safe Doors as a whole, should the special order be accepted or rejected? Explain your answer. (3 marks) f. Assume same facts as in 2(d). Would an autonomous Finishing division manager accept or reject the special order? Why
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