Question
Wetherald Products, Inc., has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another
Wetherald Products, Inc., has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below:
| Capacity in units | 55,000 | |
| Selling price to outside customers | $ | 82 |
| Variable cost per unit | $ | 53 |
| Fixed cost per unit (based on capacity) | $ | 11 |
The Pool Products Division is currently purchasing 4,000 of these pumps per year from an overseas supplier at a cost of $74 per pump.
Assume that the Pump Division has enough idle capacity to handle all of the Pool Products Divisions needs. What should be the minimum acceptable transfer price for the pumps from the standpoint of the Pump Division?
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Auditing The Art and Science of Assurance Engagements
Authors: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Joanne C. Jones
13th Canadian edition
133405508, 978-0133405507
