Ray Division of Vaugh Corporation produces electric motors. This product is currently sold to outside customers but is needed by Alpha, another division of Vaugh. Ray Division's estimated sales and standard cost data for the year ended December 31, based on practical capacity of 60,000 units are as follows: Sales 7,200,000 Less: Variable Cost 3,300,000 Contribution Margin 3,900,000 Fixed Cost 1,075,000 Operating Income 2,825,000 Ray has an opportunity to sell 12,000 units to Alpha. Alpha can purchase the units it needs from outside supplier for 92 each. REQUIREMENTS: 1. Assuming that Ray can normally sell 57,000 units to outsider customers, compute the maximum transfer price. 2. Assuming that Ray can normally sell 57,000 units to outsider customers, compute the minimum transfer price.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Ray Division of Vaugh Corporation produces electric motors. This product is currently sold to outside
customers but is needed by Alpha, another division of Vaugh. Ray Division's estimated sales and
standard cost data for the year ended December 31, based on practical capacity of 60,000 units are as
follows:
Sales
7,200,000
Less: Variable Cost
3,300,000
Contribution Margin
3,900,000
Fixed Cost
1,075,000
Operating Income
2,825,000
Ray has an opportunity to sell 12,000 units to Alpha. Alpha can purchase the units it needs from outside
supplier for 92 each.
REQUIREMENTS:
1. Assuming that Ray can normally sell 57,000 units to outsider customers, compute the maximum
transfer price.
2. Assuming that Ray can normally sell 57,000 units to outsider customers, compute the minimum
transfer price.
Transcribed Image Text:Ray Division of Vaugh Corporation produces electric motors. This product is currently sold to outside customers but is needed by Alpha, another division of Vaugh. Ray Division's estimated sales and standard cost data for the year ended December 31, based on practical capacity of 60,000 units are as follows: Sales 7,200,000 Less: Variable Cost 3,300,000 Contribution Margin 3,900,000 Fixed Cost 1,075,000 Operating Income 2,825,000 Ray has an opportunity to sell 12,000 units to Alpha. Alpha can purchase the units it needs from outside supplier for 92 each. REQUIREMENTS: 1. Assuming that Ray can normally sell 57,000 units to outsider customers, compute the maximum transfer price. 2. Assuming that Ray can normally sell 57,000 units to outsider customers, compute the minimum transfer price.
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