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The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $36 per unit Variable costs for the casing are $12 per unit, and fixed cost is $5 per unit Cotwold executives would like for the Molding Division to transfer 19,000 units to the Assembly Division at a price of $30 per unit. Assume that the Molding Division has excess capacity, but the Assembly Division requires the casing to be made from a specific blend of plastics. This would raise the variable cost per unit to $33. Required: 1. Should the Molding Division accept the $30 transfer price proposed by management? 2. Determine the minimum transfer price that it will accept 3. Determine the mutually beneficial transfer price so that the two divisions equally split the profits from the transfer

The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $36 per unit Variable costs for the casing are $12 per unit, and fixed cost is $5 per unit Cotwold executives would like for the Molding Division to transfer 19,000 units to the Assembly Division at a price of $30 per unit. Assume that the Molding Division has excess capacity, but the Assembly Division requires the casing to be made from a specific blend of plastics. This would raise the variable cost per unit to $33. Required: 1. Should the Molding Division accept the $30 transfer price proposed by management? 2. Determine the minimum transfer price that it will accept 3. Determine the mutually beneficial transfer price so that the two divisions equally split the profits from the transfer

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing
Section: Chapter Questions
Problem 4CE
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The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $36 per unit Variable costs for the casing are $12 per unit, and fixed cost is $5 per unit Cotwold executives would like for the Molding Division to transfer 19,000 units to the Assembly Division at a price of $30 per unit. Assume that the Molding Division has excess capacity, but the Assembly Division requires the casing to be made from a specific blend of plastics. This would raise the variable cost per unit to $33 Required: 1. Should the Molding Division accept the $30 transfer price proposed by management? 2. Determine the minimum transfer price that it will accept. 3. Determine the mutually beneficial transfer price so that the two divisions equally split the profits from the transfer
Transcribed Image Text:The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division. This casing is also sold to external customers for $36 per unit Variable costs for the casing are $12 per unit, and fixed cost is $5 per unit Cotwold executives would like for the Molding Division to transfer 19,000 units to the Assembly Division at a price of $30 per unit. Assume that the Molding Division has excess capacity, but the Assembly Division requires the casing to be made from a specific blend of plastics. This would raise the variable cost per unit to $33 Required: 1. Should the Molding Division accept the $30 transfer price proposed by management? 2. Determine the minimum transfer price that it will accept. 3. Determine the mutually beneficial transfer price so that the two divisions equally split the profits from the transfer
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