The Rubber Division is considering selling 3,000 kilograms (kg) of rubber to the Tire Division of...
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The Rubber Division is considering selling 3,000 kilograms (kg) of rubber to the Tire Division of the same company. Rubber Division data is as follows: Сарacity Amount sold to outside customers Selling price per kg to outside customers Variable cost per kg Fixed cost per kg (based on capacity) 150,000 kg 149,000 kg $6.00 $2.50 $1.50 Assume that $0.50/kg in variable selling costs can be avoided on intracompany sales. The Tire Division currently purchases rubber from an external supplier for $4.00/kg. Required: 1. What is the minimum acceptable price the Rubber Division will accept as a transfer price? (3 marks) 2. Should the Tire Division accept the price calculated in part 1? Why? (1 mark) The Rubber Division is considering selling 3,000 kilograms (kg) of rubber to the Tire Division of the same company. Rubber Division data is as follows: Сарacity Amount sold to outside customers Selling price per kg to outside customers Variable cost per kg Fixed cost per kg (based on capacity) 150,000 kg 149,000 kg $6.00 $2.50 $1.50 Assume that $0.50/kg in variable selling costs can be avoided on intracompany sales. The Tire Division currently purchases rubber from an external supplier for $4.00/kg. Required: 1. What is the minimum acceptable price the Rubber Division will accept as a transfer price? (3 marks) 2. Should the Tire Division accept the price calculated in part 1? Why? (1 mark)
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The Rubber Division Amount Total capacity 15000000 Less Sold to outside customers 14900000 Id... View the full answer
Related Book For
Business Statistics a decision making approach
ISBN: 978-0133021844
9th edition
Authors: David F. Groebner, Patrick W. Shannon, Phillip C. Fry
Posted Date:
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