Penn Company has a division that manufactures a component that sells for $50 and has variable costs of $25 and fixed costs of $10. Another division wants to purchase the component. What is the minimum transfer price if the division is operating at capacity? $10 $25 $35 $50
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Penn Company has a division that manufactures a component that sells for $50 and has variable costs of $25 and fixed costs of $10. Another division wants to purchase the component. What is the minimum transfer price if the division is operating at capacity?
- $10
- $25
- $35
- $50
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