Reference no: EM133169082

Questions -

Q1) CK Inc. has two divisions, S1 and Q2. S1 can produce up to 2,000 units of T97 per year. 1,900 units can be sold at a market price of $88. Q2 needs 300 units. For interdivisional sales, variable selling cost can be avoided. Last year, S1 incurred the following unit costs:

Variable manufacturing costs: $37

Fixed manufacturing costs: $22

Variable selling cost: $ 5

Calculate the minimum transfer price per unit that would be acceptable for S1.

Q2) Apple Inc. manufactures iPads and iPhones in separate divisions utilizing one plant location. The following data have been prepared for review.

Fixed operation costs $600,000

Practical capacity 1,500 hours

Budgeted usage:

iPad Division 850 hours

iPhone Division 200 hours

Budgeted variable cost per hour $400 per hour

What is the total cost per hour of use for the iPad Division assuming budgeted usage is the allocation base and a single-rate method is used?

Q3) A company has two divisions; Division A and Division B. Division A produces 800,000 Widgets per year and can sell each Widget for $120. Division A has the capacity to produce 950,000 units.

Division A records show the following; full product costs = $95 per unit, which includes fixed manufacturing overhead of $15, and variable overhead of $5 per unit, and direct variable costs of $24, all based on the current 800,000 production run.

Division B is investigating a new product, the Thingy, that would use the widget from Division A as its starting point and add specialized circuitry to manufacture each Thingy. Assuming they need up to 20,000 units, based on the above information only, what should the minimum transfer price be for each Widget sold to Division B?