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_____ 1. If Moonton Company instructed Northern Vale Division to supply Iron Hooks to Mooniyan Division, how

_____ 1. If Moonton Company instructed Northern Vale Division to supply Iron Hooks to Mooniyan Division, how

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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_____ 1. If Moonton Company instructed Northern Vale Division to supply Iron Hooks to Mooniyan Division, how 
much is the maximum transfer price that they can consider? (Round off your final answer to 3 decimal 
places)
_____ 2. Continuing from Question No.1, how much is the minimum transfer price that they can consider? 
(Round off your final answer to 3 decimal places)

 

Northern Vale is one of the divisions of Moonton Company. Northern Vale produces "Iron Hook" and can currently sell 75% of its annual capacity to outside customers. Mooniyan Division, another division of Moonton Company, developed "sacred hammer" which uses the "Iron Hook" as one of its direct materials plus another materials to be purchased from outside suppliers. Mooniyan Division is working at full capacity and will require Northern Vale to supply all the Iron Hooks that they need. All the divisions of Moonton Company uses standard costing and properly controls the costs and computes for variances. The standard cost in producing 1 unit of Iron Hook is as follows: Direct material (2.2 lbs @ P10/lb.) Php 22 Direct labor (4 dlh @ P6/dlh) 24 Factory overhead 30* *30% fixed. **Budgeted annual fixed cost is P900,000 The standard cost in producing 1 unit of Sacred Hammer is as follows: Iron Hook (1pc @ P80) Php 80 Material X (1.5 lbs @ P20/lb.) 30 Direct labor (0.5 dlh @ P36/dlh) 18 Variable Factory overhead 14 Fixed Factory overhead 12* *Based on annual capacity of 40,000 units Northern Vale currently sells the Iron Hook to outside customers at a mark-up of 10% on full standard cost while Mooniyan was able to find a supplier of Iron Hook at P80.
Transcribed Image Text:Northern Vale is one of the divisions of Moonton Company. Northern Vale produces "Iron Hook" and can currently sell 75% of its annual capacity to outside customers. Mooniyan Division, another division of Moonton Company, developed "sacred hammer" which uses the "Iron Hook" as one of its direct materials plus another materials to be purchased from outside suppliers. Mooniyan Division is working at full capacity and will require Northern Vale to supply all the Iron Hooks that they need. All the divisions of Moonton Company uses standard costing and properly controls the costs and computes for variances. The standard cost in producing 1 unit of Iron Hook is as follows: Direct material (2.2 lbs @ P10/lb.) Php 22 Direct labor (4 dlh @ P6/dlh) 24 Factory overhead 30* *30% fixed. **Budgeted annual fixed cost is P900,000 The standard cost in producing 1 unit of Sacred Hammer is as follows: Iron Hook (1pc @ P80) Php 80 Material X (1.5 lbs @ P20/lb.) 30 Direct labor (0.5 dlh @ P36/dlh) 18 Variable Factory overhead 14 Fixed Factory overhead 12* *Based on annual capacity of 40,000 units Northern Vale currently sells the Iron Hook to outside customers at a mark-up of 10% on full standard cost while Mooniyan was able to find a supplier of Iron Hook at P80.
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