Airflow Inc. produces ceiling fans for home and industrial use. The parts for the different styles of fans are produced and sold by theParts Division to the Assembly Division of Airflow Inc. The cost to the Parts Division is $12 per fan. The Assembly Division assemblesthe purchased parts into finished fans at a cost of $6 per unit and sells the assembled product to an outside wholesaler for $25 perunit. Due to the proprietary technology used to make the Airflow fans operate particularly quietly, the Parts Division is not allowed tosell the parts it produces to external customers. Both divisions have some idle capacity. The managers of both divisions are evaluatedbased on the profitability of their divisions.Required:1. What is the profit per unit of the two divisions if the transfer price is $15 per unit?Profit per unitParts DivisionAssembly Division2. What is the profit per unit of the two divisions if the transfer price is $12 per unit? (Do not leave any empty spaces; input a Owherever it is required.)Profit per unitParts DivisionAssembly Division 3. If the Parts Division operates inefficiently, causing the cost of the parts to rise to $13 per unit, and that cost is used as the transferprice, what is the profit of the two divisions? (Do not leave any empty spaces; input a O wherever it is required.)Profit per unitParts DivisionAssembly Division4. Take on the role of the Assembly Division manager and evaluate the answer in (3) above. Would you agree or disagree with the $13transfer price?O AgreeDisagree5. Which transfer price is best from the point of view of the company as a whole?Transfer price

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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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