Question

$2.00. Comparatie widgets selon 150.000 widgets in eurent year. Tulip Company is made of we dwon Aud ison A s with a vision is in the production of product Variatico per widget $1.56 the open mart for $3.30 each Division A can produce up to 300 milion des per year currently operating Mors percent capacity I n Bespeco Required 1. De them and forces Mamun Trare 2. Calculate Tulp Company's tal benefit of having the widgets transferred b

Answer 1

Since there is a spare capacity, no additional fixed cost will be incurred on the product.

Minimum transfer price is equal to variable cost per unit

i.e. $1.55 per unit

Maximum Price = Market Price i.e. $3.30 per unit

2.Benefit = (3.30-1.55)*150,000

= $262,500

3.Division A = 1.55 – 1.55 = 0 per unit

Division B = 3.30-1.55 = $1.75 per unit

4.Division A = $1.75 per unit

Division B = 0 per unit

5.Mutually beneficial transfer price = 1.55 + 1.75/2

= $2.425