E12.30) Cost-based transfer pricing: manufacturer Refer to E12.29. The assembly division's absorption cost of a component is $510, which includes $60 of applied fixed overhead costs. The transfer price has been set at $561, which is the assembly division's absorption cost plus a 10% mark-up. The electrical division has a special offer of $697.50 for its product. The electrical division incurs variable costs of $150 in addition to the transfer price for the assembly division's components. Both divisions currently have spare production capacity.

E12.30) Cost-based transfer pricing: manufacturer Refer to E12.29. The assembly division's absorption cost of a component is $510, which includes $60 of applied fixed overhead costs. The transfer price has been set at $561, which is the assembly division's absorption cost plus a 10% mark-up. The electrical division has a special offer of $697.50 for its product. The electrical division incurs variable costs of $150 in addition to the transfer price for the assembly division's components. Both divisions currently have spare production capacity.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter14: Decentralized Operations

Section: Chapter Questions

Problem 14.18E

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