Question
The Forest Lumber Company had the following historical accounting data, per 100 board feet, concerning one of its products in the Sawmill Division: Finished shelving:
The Forest Lumber Company had the following historical accounting data, per 100 board feet, concerning one of its products in the Sawmill Division: Finished shelving: Direct materials $30 Direct labor 16 Variable manufacturing overhead 8 Fixed manufacturing overhead 12 The historical data is based on an average volume per period of 20,000 board feet. The shelving is normally transferred internally from the Sawmill Division to the Finishing Division. Forest may also sell the shelving externally for $90 per 100 board feet. The divisions are taxed at identical rates. Which of the following transfer pricing methods would lead to the highest Finishing Division income if 10,000 board feet are produced and transferred in entirety this period from Sawmill to Finishing?
Select one: A. Market price B. All variable costs plus 50 percent markup C. Full absorption costing plus 10 percent markup D. None of these methods generates a higher division income than another.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started