Ch 12 problem 12-70-1

Ch 12 problem 12-70-1 - 12-70 (40 MINUTES)1.a.Transfer...

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Unformatted text preview: 12-70 (40 MINUTES)1.a.Transfer price=outlay cost + opportunity cost=$130 + $30 = $160b.Transfer price=standard variable cost + (10%)(standard variable cost)=$130 + (10%) ($130) = $143Note that the Frame Division manager would refuse to transfer at this price.2.a.Transfer price=outlay cost + opportunity cost=$130 + 0 = $130b.When there is no excess capacity, the opportunity cost is the forgone contribution margin on an external sale when a frame is transferred to the Glass Division. The contribution margin equals $30 ($160 $130). When there is excess capacity in the Frame Division, there is no opportunity cost associated with a transfer.c.Fixed overhead per frame (125%)($40) = $50Transfer price=variable cost + fixed overhead per frame + (10%)(variable cost + fixed overhead per frame)=$130 + $50 + [(10%)($130 + $50)]=$198d.Incremental revenue per window..................................$310Incremental cost per window, for Weathermaster Window Company:Direct material (Frame Division)...............................Direct material (Frame Division)....
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Ch 12 problem 12-70-1 - 12-70 (40 MINUTES)1.a.Transfer...

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