Neely Systems Corporation manufactures and sells various high-tech office automation products. Two divisions of Neely Systems Corporation are the Computer Chip Division and the Computer Division. The Computer Chip Division manufactures one product, a "super chip," that can be used by both the Computer Division and other external customers. The following information is available on this month's operations in the Computer Chip Division:Selling price per chip$50 Variable costs per chip$20 Fixed production costs$60,000 Fixed SG&A costs$90,000 Monthly capacity10,000chipsExternal sales6,000chipsInternal sales0chipsPresently, the Computer Division purchases no chips from the Computer Chips Division, but instead pays $45 to an external supplier for the 4,000 chips it needs each month.Refer to Neely Systems Corporation. Assume that next month's costs and levels of operations in the Computer and Computer Chip Divisions are similar to this month. What is the minimum of the transfer price range for a possible transfer of the super chip from one division to the other?Select one:a. $20b. $45c. $35d. $50

Lets understand the basics. Transfer price needs to calculate when there is transfer of manufacture…

Answered: Neely Systems Corporation manufactures…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 4CE

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Neely Systems Corporation manufactures and sells various high-tech office automation products. Two divisions of Neely Systems Corporation are the Computer Chip Division and the Computer Division. The Computer Chip Division manufactures one product, a "super chip," that can be used by both the Computer Division and other external customers. The following information is available on this month's operations in the Computer Chip Division:

Selling price per chip	$50
Variable costs per chip	$20
Fixed production costs	$60,000
Fixed SG&A costs	$90,000
Monthly capacity	10,000	chips
External sales	6,000	chips
Internal sales	0	chips

Presently, the Computer Division purchases no chips from the Computer Chips Division, but instead pays $45 to an external supplier for the 4,000 chips it needs each month.

Refer to Neely Systems Corporation. Assume that next month's costs and levels of operations in the Computer and Computer Chip Divisions are similar to this month. What is the minimum of the transfer price range for a possible transfer of the super chip from one division to the other?

Select one:

a. $20

b. $45

c. $35

d. $50

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