The Bathtub Division of Shatner Plumbing Corporation has recently approached the Faucet Division with a proposal. The

Question:

The Bathtub Division of Shatner Plumbing Corporation has recently approached the Faucet Division with a proposal. The Bathtub Division would like to make a special "ivory" tub with gold-plated fixtures for the company's 50-year anniversary. It would make only 5,000 of these units. It would like the Faucet Division to make the fixtures and provide them to the Bathtub Division at a transfer price of $160. If sold externally, the estimated variable cost per unit would be $135. However, by selling internally the Faucet Division would save $6 per unit on variable selling expenses. The Faucet Division is currently operating at full capacity. Its standard unit sells for $50 per unit and has variable costs of $29.

Instructions
Compute the minimum transfer price that the Faucet Division should be willing to accept, and discuss whether it should accept this offer.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Managerial Accounting Tools for business decision making

ISBN: 978-0470477144

5th edition

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

Question Posted: