Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $30
The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $30 per unit. Variable costs for the casing are $12 per unit, and fixed cost is $4 per unit. Cotwold executives would like for the Molding Division to transfer 13,000 units to the Assembly Division at a price of $23 per unit. Assume that the Molding Division has excess capacity, but the Assembly Division requires the casing to be made from a specific blend of plastics. This would raise the variable cost per unit to $25. Required: 1. Should the Molding Division accept the $23 transfer price proposed by management? 2. Determine the minimum transfer price that it will accept. 3. Determine the mutually beneficial transfer price so that the two divisions equally split the profits from the transfer. Complete this question by entering your answers in the tabs below. Should the Molding Division accept the $23 transfer price proposed by management? The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $30 per unit. Variable costs for the casing are $12 per unit, and fixed cost is $4 per unit. Cotwold executives would like for the Molding Division to transfer 13,000 units to the Assembly Division at a price of $23 per unit. Assume that the Molding Division has excess capacity, but the Assembly Division requires the casing to be made from a specific blend of plastics. This would raise the variable cost per unit to $25. Required: 1. Should the Molding Division accept the $23 transfer price proposed by management? 2. Determine the minimum transfer price that it will accept. 3. Determine the mutually beneficial transfer price so that the two divisions equally split the profits from the transfer. Complete this question by entering your answers in the tabs below. Determine the minimum transfer price that it will accept. The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $30 per unit. Variable costs for the casing are $12 per unit, and fixed cost is $4 per unit. Cotwold executives would like for the Molding Division to transfer 13,000 units to the Assembly Division at a price of $23 per unit. Assume that the Molding Division has excess capacity, but the Assembly Division requires the casing to be made from a specific blend of plastics. This would raise the variable cost per unit to $25. Required: 1. Should the Molding Division accept the $23 transfer price proposed by management? 2. Determine the minimum transfer price that it will accept. 3. Determine the mutually beneficial transfer price so that the two divisions equally split the profits from the transfer. Complete this question by entering your answers in the tabs below. Determine the mutually beneficial transfer price so that the two divisions equally split the profits from the transfer. Note: Round your answer to 2 decimal places
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