Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 19 Aug 2017 My Price 13.00

Sound System Division

53.                                                                                                                              LO.6 (Transfer prices) In each of the following cases, the Speaker Division can sell all of its production of audio speakers externally or some internally to the Sound System Division and the remainder to outside customers. The Speaker Division’s production capacity is 400,000 units annually. The data related to each independent case are as follows:

 

Speaker Division

Case 1               Case 2

Selling price to outside customers                                    $      80              $                                                                                          65 Production costs per unit

Direct material                                                                          32                      22

Direct labor                                                                            12                      10

Variable overhead                                                                        4                        3

Fixed overhead (based on capacity)                                        1                        1

Other variable selling and delivery costs per unit*                     6                        3

Sound System Division

Number of speakers needed annually                                40,000                                                                                                         40,000 Current unit price being paid to outside supplier                                  $      70               $                                                                                          57

 

*In either case, $1 of the selling expenses will not be incurred on intracompany transfers.

 

a.     For each case, determine the upper and lower limits for a transfer price for speakers.

b.    For each case, determine a transfer price for the Speaker Division that will provide a $12 contribution margin per unit.

c.     Using the information developed for (b), determine a dual transfer price for Case 1 assuming that Sound System will acquire the speakers from the Speaker Division at

$12 below Sound System’s purchase price from outside suppliers.

Answers

Maurice Tutor
(5)
Status NEW Posted 19 Aug 2017 12:08 AM My Price 13.00

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