Skysong Corporation makes backpacks, with a specialty line for baseball players. This backpack has a spot...
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Skysong Corporation makes backpacks, with a specialty line for baseball players. This backpack has a spot for everything-helmet, spikes, glove, and bats-and it comes with a hook at the top that makes it easy to hang from a chain link fence in the dugout. The backpack division buys the hooks from-you guessed it-the hook division, which has enough capacity to meet both internal and external demand. At present, the hook and backpack divisions have agreed on a transfer price of $0.80 per hook. Current volumes, costs, and prices are listed below for each division for one month. The costs for the backpack division reflect all unit backpack costs, except for the hook. Variable cost per unit Absorption cost per unit. Market price per unit Quantity produced Quantity sold externally Quantity sold internally (a) Gross margin Hook Division Backpack Division $0.50 $18.00 $0.80 $21.00 $0.95 $47.00 2,400 $ 1,700 700 According to the information given, how much gross margin would each division report for one month? How much total gross margin would the company report (before eliminating intracompany transactions)? Hook division 700 $ 700 N/A Backpack division $ Total Assume now that the hook division could sell all of its production externally. Because of this, the hook division manager wants to renegotiate the deal with the backpack division. Explain what you believe the new negotiated transfer price will be. New transfer price $ per unit Skysong Corporation makes backpacks, with a specialty line for baseball players. This backpack has a spot for everything-helmet, spikes, glove, and bats-and it comes with a hook at the top that makes it easy to hang from a chain link fence in the dugout. The backpack division buys the hooks from-you guessed it-the hook division, which has enough capacity to meet both internal and external demand. At present, the hook and backpack divisions have agreed on a transfer price of $0.80 per hook. Current volumes, costs, and prices are listed below for each division for one month. The costs for the backpack division reflect all unit backpack costs, except for the hook. Variable cost per unit Absorption cost per unit. Market price per unit Quantity produced Quantity sold externally Quantity sold internally (a) Gross margin Hook Division Backpack Division $0.50 $18.00 $0.80 $21.00 $0.95 $47.00 2,400 $ 1,700 700 According to the information given, how much gross margin would each division report for one month? How much total gross margin would the company report (before eliminating intracompany transactions)? Hook division 700 $ 700 N/A Backpack division $ Total Assume now that the hook division could sell all of its production externally. Because of this, the hook division manager wants to renegotiate the deal with the backpack division. Explain what you believe the new negotiated transfer price will be. New transfer price $ per unit
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Related Book For
Modern Advanced Accounting In Canada
ISBN: 9781259066481
7th Edition
Authors: Hilton Murray, Herauf Darrell
Posted Date:
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