Honey Division Produces a product that it sells to the outside market. It has compiled the following:
Question:
Honey Division Produces a product that it sells to the outside market. It has compiled the following:
Variable Manufacturing Cost per Unit: $15
Variable Selling Costs per Unit: $3
Total Fixed Manufacturing Cost per Unit: $150,000
Total Fixed Selling Costs: $30,000
Per Unit Selling Price to Outside Buyers: $40 Capacity in Units per year: 25,000
Bread division of the same company is currently buying an identical product from an outside provider for $38per unit. It wishes to purchase 3000 units per year from Honey. If the internal transfer is made, Humpty will not incur any selling costs.
Question:
Calculate the minimum transfer price per unit that Humpty will accept, Explain why these prices are acceptable to Honey:
i) Honey is Currently Selling 18,000 units to external customers
ii) Honey is currently selling 25,000 units to external customers.
iii) If Bread were to buy from Honey in i) what are the total gains or losses for i) and for ii)
Introduction to Management Accounting
ISBN: 978-0133058789
16th edition
Authors: Charles Horngren, Gary Sundem, Jeff Schatzberg, Dave Burgsta