Perfumes Ltd has two divisions: the Perfume Division and the Bottle Division. The company is decentralised and each division is evaluated as a profit centre. The Bottle Division produces bottles that can be used by the Perfume Division. The Bottle Division's variable manufacturing cost per unit is $3.00 and shipping costs are $0.20 per unit. The Bottle Division's external sales price is $4.00 per unit. No shipping costs are incurred on sales to the Perfume Division. The Perfume Division can purchase similar bottles in the external market for $3.50. The Bottle Division has sufficient capacity to meet all external market demands in addition to meeting the demands of the Perfume Division.

Perfumes Ltd has two divisions: the Perfume Division and the Bottle Division. The company is decentralised and each division is evaluated as a profit centre. The Bottle Division produces bottles that can be used by the Perfume Division. The Bottle Division's variable manufacturing cost per unit is $3.00 and shipping costs are $0.20 per unit. The Bottle Division's external sales price is $4.00 per unit. No shipping costs are incurred on sales to the Perfume Division. The Perfume Division can purchase similar bottles in the external market for $3.50. The Bottle Division has sufficient capacity to meet all external market demands in addition to meeting the demands of the Perfume Division.

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter24: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 3CMA

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Perfumes Ltd has two divisions: the Perfume Division and the Bottle Division. The company isdecentralised and each division is evaluated as a profit centre. The Bottle Division produces bottlesthat can be used by the Perfume Division. The Bottle Division's variable manufacturing cost per unitis $3.00 and shipping costs are $0.20 per unit. The Bottle Division's external sales price is $4.00 perunit. No shipping costs are incurred on sales to the Perfume Division. The Perfume Division canpurchase similar bottles in the external market for $3.50.The Bottle Division has sufficient capacity to meet all external market demands in addition to meetingthe demands of the Perfume Division. Assume the Bottle Division has no excess capacity and can sell everything produced externally.Would the transfer price change?
Perfumes Ltd has two divisions: The Perfume Division and the Bottle Division. The company is decentralised, and each division is evaluated as a profit centre. The Bottle Division produces bottles that can be used by the Perfume Division. The Bottle Division's variable manufacturing cost per unit is $3.00 and shipping costs are $0.20 per unit. The Bottle Division's external sales price is $4.00 per unit. No shipping costs are incurred on sales to the Perfume Division. The Perfume Division can purchase similar bottles in the external market for $3.50.The Bottle Division has sufficient capacity to meet all external market demands in addition to meeting the demands of the Perfume Division. Required When is it more appropriate to use market-based transfer price rather than cost-based transfer price?
Perfumes Ltd has two divisions: the Perfume Division and the Bottle Division. The company is decentralised and each division is evaluated as a profit centre. The Bottle Division produces bottles that can be used by the PerfumeDivision. The Bottle Division's variable manufacturing cost per unit is $3.00 and shipping costs are $0.20 per unit. The Bottle Division's external sales price is $4.00 per unit. No shipping costs are incurred on sales to the PerfumeDivision. The Perfume Division can purchase similar bottles in the external market for $3.50. The Bottle Division has sufficient capacity to meet all external market demands in addition to meeting the demands of the Perfume Division. Required: Using the general rule, determine the minimum transfer price. Assume the Bottle Division has no excess capacity and can sell everything produced externally. Would the transfer price change? Assume the Bottle Division has no excess capacity and can sell everything produced externally.…
Perfumes Ltd has two divisions: the Perfume Division and the Bottle Division. The company is decentralised and each division is evaluated as a profit centre. The Bottle Division produces bottles that can be used by the Perfume Division. The Bottle Division's variable manufacturing cost per unit is $3.00 and shipping costs are $0.20 per unit. The Bottle Division's external sales price is $4.00 per unit. No shipping costs are incurred on sales to the Perfume Division. The Perfume Division can purchase similar bottles in the external market for $3.50.The Bottle Division has sufficient capacity to meet all external market demands in addition to meeting the demands of the Perfume Division.Required:a) Using the general rule, determine the minimum transfer price. b) Assume the Bottle Division has no excess capacity and can sell everything produced externally. Would the transfer price change? c) Assume the Bottle Division has no excess capacity and can sell everything produced externally. What…
Perfumes Ltd has two divisions: the Perfume Division and the Bottle Division. The company is decentralised and each division is evaluated as a profit centre. The Bottle Division produces bottles that can be used by the Perfume Division. The Bottle Division's variable manufacturing cost per unit is $3.00 and shipping costs are $0.20 per unit. The Bottle Division's external sales price is $4.00 per unit. No shipping costs are incurred on sales to the Perfume Division. The Perfume Division can purchase similar bottles in the external market for $3.50. The Bottle Division has sufficient capacity to meet all external market demands in addition to meeting the demands of the Perfume Division. Required: Using the general rule, determine the minimum transfer price. Assume the Bottle Division has no excess capacity and can sell everything produced externally. Would the transfer price change? Assume the Bottle Division has no excess capacity and can sell everything produced…
Perfumes Ltd has two divisions: the Perfume Division and the Bottle Division. The company is decentralised and each division is evaluated as a profit centre. The Bottle Division produces bottles that can be used by the Perfume Division. The Bottle Division's variable manufacturing cost per unit is $3.00 and shipping costs are $0.20 per unit. The Bottle Division's external sales price is $4.00 per unit. No shipping costs are incurred on sales to the Perfume Division. The Perfume Division can purchase similar bottles in the external market for $3.50. The Bottle Division has sufficient capacity to meet all external market demands in addition tomeeting the demands of the Perfume Division. Required: a) Assume the Bottle Division has no excess capacity and can sell everything producedexternally. What is the maximum amount Perfume Division would be willing to pay for thebottles? b) When is it more appropriate to use market-based transfer price rather than cost-basedtransfer price?
Perfumes Ltd has two divisions: the Perfume Division and the Bottle Division. The company is decentralised and each division is evaluated as a profit centre. The Bottle Division produces bottles that can be used by the Perfume Division. The Bottle Division's variable manufacturing cost per unit is $3.00 and shipping costs are $0.20 per unit. The Bottle Division's external sales price is $4.00 per unit. No shipping costs are incurred on sales to the Perfume Division. The Perfume Division can purchase similar bottles in the external market for $3.50.The Bottle Division has sufficient capacity to meet all external market demands in addition to meeting the demands of the Perfume Division.Required:a) Using the general rule, determine the minimum transfer price. b) Assume the Bottle Division has no excess capacity and can sell everything produced externally. Would the transfer price change?c) Assume the Bottle Division has no excess capacity and can sell everything produced externally. What…