Company E is a large manufacturer that treats its divisions as profit centers. Division X produces an electronic component at the following costs: Variable production cost P80/unit Variable selling cost P10/unit Fixed cost (based on 10,000 units) P10/unit Division Y currently purchases a similar component from an outside supplier for P105/unit. It has determined that the component produced by Division X could be used instead with no adverse effects on the quality of the final product. Currently, Division X, which is operating at full capacity, sells all of its output to outside customers at P112/unit per component. What is the lowest price at which Division X would agree to transfer the component to Division Y?
Company E is a large manufacturer that treats its divisions as profit centers. Division X produces an electronic component at the following costs: Variable production cost P80/unit Variable selling cost P10/unit Fixed cost (based on 10,000 units) P10/unit Division Y currently purchases a similar component from an outside supplier for P105/unit. It has determined that the component produced by Division X could be used instead with no adverse effects on the quality of the final product. Currently, Division X, which is operating at full capacity, sells all of its output to outside customers at P112/unit per component. What is the lowest price at which Division X would agree to transfer the component to Division Y?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 4CMA: Morrisons Plastics Division, a profit center, sells its products to external customers as well as to...
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Company E is a large manufacturer that treats its divisions as profit centers. Division X produces an electronic component at the following costs:
Variable production cost P80/unit
Variable selling cost P10/unit
Fixed cost (based on 10,000 units) P10/unit
Division Y currently purchases a similar component from an outside supplier for P105/unit. It has determined that the component produced by Division X could be used instead with no adverse effects on the quality of the final product. Currently, Division X, which is operating at full capacity, sells all of its output to outside customers at P112/unit per component.
Variable selling cost P10/unit
Fixed cost (based on 10,000 units) P10/unit
Division Y currently purchases a similar component from an outside supplier for P105/unit. It has determined that the component produced by Division X could be used instead with no adverse effects on the quality of the final product. Currently, Division X, which is operating at full capacity, sells all of its output to outside customers at P112/unit per component.
What is the lowest price at which Division X would agree to transfer the component to Division Y?
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