Atascadero Industries operates a Manufacturing Division and a Marketing Division. Both divisions are evaluated as profit...
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Atascadero Industries operates a Manufacturing Division and a Marketing Division. Both divisions are evaluated as profit centers. Marketing buys products from Manufacturing and packages them for sale. Manufacturing sells many components to third parties in addition to Marketing. Selected data from the two operations follow. Marketing Manufacturing 1,000,000 Capacity (units) 500,000 4,550 $ 1,400 $ Sales pricea Variable costsb $ 560 $ 1,680 $10,000,000 $7,200,000 Fixed costs a For Manufacturing, this is the price to third parties. b For Marketing, this does not include the transfer price paid to Manufacturing. Suppose Manufacturing is located in Country X with a tax rate of 65 percent and Marketing in Country Y with a tax rate of 35 percent. All other facts remain the same. Required: a. Current production levels in Manufacturing are 500,000 units. Marketing requests an additional 100,000 units to produce a special order. What transfer price would you recommend? b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend? c. Suppose Manufacturing is operating at 920,000 units. What transfer price would you recommend? a. Transfer price per unit b. Transfer price per unit c. Transfer price per unit Atascadero Industries operates a Manufacturing Division and a Marketing Division. Both divisions are evaluated as profit centers. Marketing buys products from Manufacturing and packages them for sale. Manufacturing sells many components to third parties in addition to Marketing. Selected data from the two operations follow. Marketing Manufacturing 1,000,000 Capacity (units) 500,000 4,550 $ 1,400 $ Sales pricea Variable costsb $ 560 $ 1,680 $10,000,000 $7,200,000 Fixed costs a For Manufacturing, this is the price to third parties. b For Marketing, this does not include the transfer price paid to Manufacturing. Suppose Manufacturing is located in Country X with a tax rate of 65 percent and Marketing in Country Y with a tax rate of 35 percent. All other facts remain the same. Required: a. Current production levels in Manufacturing are 500,000 units. Marketing requests an additional 100,000 units to produce a special order. What transfer price would you recommend? b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend? c. Suppose Manufacturing is operating at 920,000 units. What transfer price would you recommend? a. Transfer price per unit b. Transfer price per unit c. Transfer price per unit
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Related Book For
Fundamentals of Cost Accounting
ISBN: 978-1259565403
5th edition
Authors: William Lanen, Shannon Anderson, Michael Maher
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