# 25 - 22-28(Cont'd By formula costs are = = \$120 \$120 \$75...

This preview shows page 1. Sign up to view the full content.

This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 22-28 (Cont'd.) By formula, costs are: + = = \$120 + \$120 + \$75 \$20 = \$175 *Contribution of \$30 per unit by B is not given up if transfer occurs, so it is not relevant here. 2a. At most, Division A can sell only 900 units and can produce 1,000. Therefore, at least 100 units should be transferred, at a transfer price no less than \$120. The question is whether or not a second 100 units should be transferred. Company Viewpoint a: Sell 900 outside at \$195 transfer 100 Transfer price \$195 Variable cost 120 Contribution \$ 75 900 = \$67,500 b: Sell 800 outside at \$200, Transfer price Variable cost Contribution \$200 120 \$ 80 800 = \$64,000 Total contribution forgone if transfer of 100 units occurs = \$67,500 \$64,000 = \$3,500 (or \$35 per unit) + = Transfer price \$120 + 2b. By formula: + = \$120 + = \$120 + \$75 \$40 = \$155 Transfer Price Schedule (minimum acceptable transfer price) Units Transfer Price \$35 = \$155 ...
View Full Document

## 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.

Ask a homework question - tutors are online