Company has two divisions, Division Y and Division Z. Division Y sells to both Divisions Z and outside customers. However, Division Z buys only from Division Y.

The following unit costs were incurred by Division Y from the coming year:

Direct Materials $10

Direct Labor $6

Variable Overheads $3

Variable Selling Costs $1

Total $20

Suppose that for the year, Division Y produce 40,000 units, of which 30,000 were sold to Division Z for 25 each. The outside sales were for $30. Also, the fixed costs for the year were 80,000, When division Z receives the unit from division Y, it processes them further before selling them to customers. The variable cost of Division Z sells all the units from Division Y at $35 each.

Required: Determine the gross profit per finished product for Division Z based on the following:

1. Cost Method
2. Cost plus method
3. Market plus method
4. Negotiated price method
5. Dual pricing method

Prepare journal entry on the books of Division Y and Division Z

Answer rating: 100% (QA)

Cost Method In the cost method the unit cost of the product is transferred from Division Y to Divisi... View the full answer