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Assume the Small Components Division of Swisher Manufacturing produces a video card used in the assembly of a variety of electronic products The division’s manufacturing costs and variable selling

Assume the Small Components Division of Swisher Manufacturing produces a video card used in the assembly of a variety of electronic products. The division’s manufacturing costs and variable selling expenses related to the video card are as follows: Cost per unit Direct materials $ 11.00 Direct labor $ 5.00 Variable manufacturing overhead $ 4.00 Fixed manufacturing overhead (at current production level) $ 6.00 Variable selling expenses $ 2.00 The Computer Division of Swisher Manufacturing can use the video card produced by the Small Components Division and is interested in purchasing the video card in- house rather than buying it from an outside supplier. The Small Components Division has sufficient excess capacity with which to make the extra video cards. Because of competition, the market price for this video card is $ 30 regardless of whether the video card is produced by Swisher Manufacturing or another company. Requirements 1. What is the highest acceptable transfer price for the divisions? 2. Assuming the transfer price is negotiated between the divisions of the company, what would be the lowest acceptable transfer price? 3. Which transfer price would the manager of the Small Components Division prefer? Which transfer price would the manager of the Computer Division prefer? 4. If the company’s policy requires that all in- house transfers must be priced at full absorption cost plus 10%, what transfer price would be

Jun 25 2020 View more View Less

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