The X division of XYZ Company is currently operating at 60% capacity or 6,000 units. It produces a single product and sells all its production to outside customers for $17.50 per unit. Variable costs are $7 per unit, and fixed costs are $6 per unit at the current production level. Division Y, which currently purchases this product from an outside supplier for $16 per unit, would like to purchase the product from Division X. Division X will operate at 80% capacity to meet outside customers' and Division Y's demand. 1. If the two divisions agreed on a transfer price based on full cost at 80% capacity, what will be the transfer price?
The X division of XYZ Company is currently operating at 60% capacity or 6,000 units. It produces a single product and sells all its production to outside customers for $17.50 per unit. Variable costs are $7 per unit, and fixed costs are $6 per unit at the current production level. Division Y, which currently purchases this product from an outside supplier for $16 per unit, would like to purchase the product from Division X. Division X will operate at 80% capacity to meet outside customers' and Division Y's demand. 1. If the two divisions agreed on a transfer price based on full cost at 80% capacity, what will be the transfer price?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter11: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 3CMA: Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each...
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The X division of XYZ Company is currently operating at 60% capacity or 6,000 units. It produces a single product and sells all its production to outside customers for $17.50 per unit. Variable costs are $7 per unit, and fixed costs are $6 per unit at the current production level. Division Y, which currently purchases this product from an outside supplier for $16 per unit, would like to purchase the product from Division X. Division X will operate at 80% capacity to meet outside customers' and Division Y's demand.
1. If the two divisions agreed on a transfer price based on full cost at 80% capacity, what will be the transfer price?
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