Word Wizard is a publishing company with a number of different book lines. Each line has contracts with a number of different authors. The company also owns a printing operation called Quick Press. The book lines and the printing operation each operate as a separate profit center. The printing operation earns revenue by printing books by authors under contract with the book lines owned by Word Wizard, as well as authors under contract with other companies. The printing operation bills out at $0.01 per page, and a typical book requires 390 pages of print. A manager from Business Books, one of the Word Wizard’s book lines, has approached the manager of the printing operation offering to pay $0.007 per page for 1,500 copies of a 390-page book. The book line pays outside printers $0.008 per page. The printing operation's variable cost per page is $0.003. Determine whether the printing should be done internally or externally, and the appropriate transfer price, under each of the following situations. (a) Assume that the printing operation is booked solid for the next 2 years, and it would have to cancel an obligation with an outside customer in order to meet the needs of the internal division. (Round Transfer price to 2 decimal places, e.g. 0.18.) Printing should be done ExternallyInternally Minimum transfer price $

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter16: Multistate Corporate Taxation

Section: Chapter Questions

Problem 43P

See similar textbooks

Related questions

Question

Word Wizard is a publishing company with a number of different book lines. Each line has contracts with a number of different authors. The company also owns a printing operation called Quick Press. The book lines and the printing operation each operate as a separate profit center. The printing operation earns revenue by printing books by authors under contract with the book lines owned by Word Wizard, as well as authors under contract with other companies. The printing operation bills out at $0.01 per page, and a typical book requires 390 pages of print. A manager from Business Books, one of the Word Wizard’s book lines, has approached the manager of the printing operation offering to pay $0.007 per page for 1,500 copies of a 390-page book. The book line pays outside printers $0.008 per page. The printing operation's variable cost per page is $0.003.

Determine whether the printing should be done internally or externally, and the appropriate transfer price, under each of the following situations.

(a)

Assume that the printing operation is booked solid for the next 2 years, and it would have to cancel an obligation with an outside customer in order to meet the needs of the internal division. (Round Transfer price to 2 decimal places, e.g. 0.18.)

Printing should be done		ExternallyInternally
Minimum transfer price		$

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions