10 - 22-19 (Cont'd.) 3. Transfer price at market price =...

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Unformatted text preview: 22-19 (Cont'd.) 3. Transfer price at market price = $200 per 100 board feet. Sell as Raw Lumber Raw Lumber Division Division revenues Division variable costs Division operating income Finished Lumber Division Division revenues Transferred-in costs Division variable costs Division operating income Sell as Finished Lumber $200 100 $100 $200 100 $100 $ 0 -- -- $ 0 $275 200 125 $ (50) The Raw Lumber Division will maximize division operating income by selling raw lumber, which is the action preferred by the company as a whole. Finished Lumber Division will maximize division operating income by not further processing raw lumber; not further processing is preferred by the company as a whole. ...
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This note was uploaded on 02/05/2012 for the course ACCOUNTING acct 504 taught by Professor Dehmal during the Spring '10 term at DeVry Pittsburgh.

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