Innovative Systems (IS) is a division of Global Electronics, Inc. IS produces videogame systems. These systems are
Question:
Selling price of standard circuit board ...... $54
Variable cost of standard circuit board ...... 30
Additional variable cost of special circuit board . 20
Instructions
For each of the following independent situations, calculate the minimum transfer price, and discuss whether the internal transfer should take place or whether IS should purchase the circuit board externally.
(a) IS has offered to pay the LT Division $62 per circuit board. The LT Division has no available capacity. The LT Division would have to forgo sales of 200,000 circuit boards to existing customers in order to meet the request of IS.
(b) IS has offered to pay the LT Division $90 per circuit board. The LT Division has no available capacity. The LT Division would have to forgo sales of 250,000 circuit boards to existing customers in order to meet the request of IS.
(c) IS has offered to pay the LT Division $62 per circuit board. The LT Division has available capacity.
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Related Book For
Managerial Accounting Tools for business decision making
ISBN: 978-1118096895
6th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
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