Reference no: EM132838344

Memory Production manufactures photo frames. The photo frames are assembled in the Frame Division. The half-finished frames are then transferred to the Finishing Division, where the glass and other components are installed.

The standard cost for the company's A4 side frame is detailed as follows:

                                                                       Frame Division               Finishing Division

Direct material                                             $4.50                        $9.00 (exclude transfer)

Direct labour                                                 6.00                            4.50

Variable overhead                                            9.00                                 9.00

Total                                                            19.50                                      22.50

The frame division can also sell half-finished frames to photo framing companies which install the glass and other components. The sales price of a half-finished frame is $24.00. The Finishing Division sells finished frames for $57.00.

Required:

Problem a) Assume that there is no spare capacity in the Frame Division, use the general transfer pricing rule to calculate the transfer price for half-finished frames.