Two Wheel Green Machines manufactures and sells bicycles. The tire manufacturing division sells its product to customers
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Question:
Two Wheel Green Machines manufactures and sells bicycles. The tire manufacturing division sells its product to customers for $15 each. The variable cost per tire is $7.50, and fixed costs per tire are $3.00. The bicycle assembly division has been buying tires from an outside source for $14 each. Upper management wants the tire division to transfer 50,000 tires to the assembly division within the company at a price of $12 per tire. The tire division has sufficient excess capacity to provide the 50,000 tires to the assembly division.
Calculate the minimum transfer price that the tire division should accept.
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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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