Home / Questions / Effects of transfer price choices McCann Company has two divisions Division C and Division...
Effects of transfer price choices McCann Company has two divisions, Division C and Division D. Division C manufactures Part C82 and sells it to Division D, and also sells the same part to the outside market for $50 per unit. Division C has capacity to make 400,000 units of C82 per year. The division’s fixed costs are $5,000,000 per year and its variable costs per unit are as follows:
|
Direct materials |
$20 |
|
Direct labor |
12 |
|
Variable overhead |
8 |
Part C82 is an essential component for Division D’s only product; the division sells 200,000 units per year at a price of $120 per unit. Division D’s fixed costs are $4,000,000 per year and its variable costs per unit, excluding the cost of Part C82, are as follows:
|
Direct materials |
$10 |
|
Direct labor |
25 |
|
Variable overhead |
10 |
Required
Suppose Division C’s demand for C82 from the outside market is currently 150,000 units per year. By how much will McCann’s income decrease if Division D purchases its desired 200,000 units of C82 at $50 per unit from the market rather than from Division C? What transfer price(s) would you suggest to induce both divisions to want Division D to purchase from Division C instead of from the market?
Jul 01 2020 View more View Less
The following table presents ROA calculations for three companies in the retail grocery industry using earnings before interest (EBI) and balance sheet data for each comp...
May 25 2020Personality tests, while valid and reliable, are not generally accepted as legally defensible in the selection process.114) In an interview, worker-requirement questions...
Jan 24 2020Author of the Philippine Declaration of Independence: A. Mariano Noriel B. Ambrosio Rianzares Bautista C. Venacio Concepción D. Tomás Mascardo E. Licerio Gerónimo
Jul 10 2021Dog Up! Franks is looking at a new sausage system with an Installed cost of $561, 600. This cost will be depreciated straight-line to zero over the project's 7-year life,...
Apr 08 2020On the basis of formal charge, which among the three Lewis structures of is the best Lewis structure?
Jul 22 2021Heavy dust can cause a) leaf blights b) opening of stomata c) closure of stomata d) browning of leaves
Jul 12 2021Match the words with their defining feature.osteoblasta. conveys excitatory signalmyofibrilb. in the handsmyoglobinc. bone-forming cellkneed. main thin filament proteinac...
Jun 07 2021On June 30, 2016, Hardy Corporation issued $13.0 million of its 10% bonds for $11.8 million. The bonds were priced to yield 12%. The bonds are dated June 30, 2016, and ma...
Mar 22 2020How can building pressure be accurately measured?
Jun 10 2021