Exercise 22-19 (Algo) Determining transfer prices LO C1 The Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry children or cargo. The trailers have a market price of $103 each. Each trailer incurs $35 of variable manufacturing costs. The Trailer division has capacity for 23,000 trailers per year and has fixed costs of $540,000 per year. 1. Assume the Assembly division of Baxter Bicycles wants to buy 6,000 trailers per year from the Trailer division. If the Trailer division can sell all of the trailers it manufactures to outside customers (and has no excess capacity), what price should be used on transfers between divisions? 2. Assume the Trailer division currently only sells 9,400 trailers to outside customers and has excess capacity. The Assembly division wants to buy 6,000 trailers per year from the Trailer division. What is the range of acceptable prices on transfers between divisions? 1. Transfer price per trailer > Answer is complete but not entirely correct. $ 35 X 2. Transfer price per trailer will be at least $ 68 × but not more than $ 103

Exercise 22-19 (Algo) Determining transfer prices LO C1 The Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry children or cargo. The trailers have a market price of $103 each. Each trailer incurs $35 of variable manufacturing costs. The Trailer division has capacity for 23,000 trailers per year and has fixed costs of $540,000 per year. 1. Assume the Assembly division of Baxter Bicycles wants to buy 6,000 trailers per year from the Trailer division. If the Trailer division can sell all of the trailers it manufactures to outside customers (and has no excess capacity), what price should be used on transfers between divisions? 2. Assume the Trailer division currently only sells 9,400 trailers to outside customers and has excess capacity. The Assembly division wants to buy 6,000 trailers per year from the Trailer division. What is the range of acceptable prices on transfers between divisions? 1. Transfer price per trailer > Answer is complete but not entirely correct. $ 35 X 2. Transfer price per trailer will be at least $ 68 × but not more than $ 103

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 29BEB: Sales Needed to Earn Target Income Chillmax Company plans to sell 3,500 pairs of shoes at 60 each in...

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Chapter 7 Problem Solution 1 Please select the correct answer and solve and explain. "Goodstone Tire Corp sells tires for $90 each. Per unit costs associated with producing and selling the tires are: Direct Materials $35 Direct Labor $10 Factory Overhead $20 The variable portion of the factory overhead is $8 per unit. A foreign company wants to purchase 1,000 tires for $65 each. Assuming Goodstone has excess capacity: 1) The incremental profit from special order will be $12,000 2) The incremental loss from the special order will be $25,000 3) The will be no incremental loss or profit from the special order
Problem 1 Young Siding Co. produces computers, which sell for $400 each. A foreign distribution wants to order 1,000 computers at $300 each. Production costs per unit at capacity of 30,000 units are: Direct materials $90 Direct labor 120 Variable overhead 50 Fixed overhead 60 Required A. How much is the relevant cost of producing one more computer? B. What is the effect on profit of accepting the special order?
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The following information is available for Division X of Meisels, Inc.: Fixed cost per unit (based on capacity) Variable cost per unit Capacity in units Selling price to outside customers $5.25 $32 24,000 $41 Division Y would like to purchase 6,000 units each year from Division X. Division X has enough excess capacity to handle all of Division Y's needs. Division Y now purchases from an outside supplier at a price of $39 and insists that it should be charged that same price by Division X. If Division X refuses to accept the $39 price for transfers to Division Y, what effect would this have on the total annual profit of Meisels, Inc.?