Question
The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $25
The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $25 per unit. Variable costs for the casing are $12 per unit and fixed cost is $3 per unit. Cotwold executives would like for the Molding Division to transfer 8,000 units to the Assembly Division at a price of $18 per unit. Assume that the Molding Division has enough excess capacity to accommodate the request. Required: 1. Should the Molding Division accept the $18 transfer price proposed by management? No Yes 2. Calculate the effect on Molding Divisions net income if it accepts the $18 transfer price.
Net Income:
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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