Question1a chester corporation is launching a new product

Reference no: EM13348637

Question:

1(a) Chester Corporation is launching a new product that is expected to cost $75 in direct materials, $50 in direct labor, and $100 in variable overhead per unit.

Fixed costs related with the product are expected to be $500,000 each year the product is sold and development and setup costs are expected to be $3,000,000. Chester expects to sell an average of 15,ooo units a year over the product's 7-year life. Chester hopes to earn a profit of 10% of full costs.

What price should be set for the product?

1(b) Barry Manufacturing produces goods costing $25 per unit in variable costs and $40 per unit in fixed cost that sell for $100 each. Silman Enterprises has requested that Barry manufacture 5,000 units for them in a one-time-only special order. Barry has the manufacturing capacity to fill the particular order without giving up any regular sales.

Determine the minimum price per unit the company should accept.

1(c) Montevallo Manufacturing operates a division in Brazil that manufactures goods for $30 in variable costs per unit. All 20,000 units manufactured every year are transferred to the Chicago division, where they are packaged for an additional $10 per unit and sold on the market for $75 each. There is no market for the product when it is unpackaged. The fixed costs of the Brazil division are $200,000 per year, and the fixed costs of the Chicago division are $250,000 per year. The tax rate in Brazil is 20%, while in Chicago the company pays 30% in taxes.

Determine the transfer price if it is based on:

a) Variable cost with a 10% markup

b) Full cost with a 10% markup

c) Which of the prices evaluated above would the company as a whole most prefer?

d) Provided that there is no intermediate market for the transferred product, what difficulties would arise if the divisions were to attempt to negotiate a transfer price?

Reference no: EM13348637

Questions Cloud

Question1 using microsoft excel prepare a flowchart : question1. using microsoft excel prepare a flowchart documenting the acquisitionpayment process for abc corporation.

Questionacme company uses the weighted-average method in to : questionacme company uses the weighted-average method in to compute product costs and reports the subsequent costs for

Questionace company produces a product that sells for 142 : questionace company produces a product that sells for 142 per unit. ace in june and july the first 2 months of

Questionat the starting of 2014 ace company estimated the : questionat the starting of 2014 ace company estimated the subsequent costs to produce one unit of product 5 pounds of

Question1a chester corporation is launching a new product : question1a chester corporation is launching a new product that is expected to cost 75 in direct materials 50 in direct

Questionthe cuts-n-curves athletic club is a state-wide : questionthe cuts-n-curves athletic club is a state-wide series of full-service fitness clubs that cater to the

Questionon march 1 2014 rollinger company acquired real : questionon march 1 2014 rollinger company acquired real estate on which it planned to build a small office building.

Questionit is a wine industry and the matter is inventory : questionit is a wine industry and the matter is inventory valuation. please suppose that wholesale and retail prices

Questionwymont company manufactures a single product that : questionwymont company manufactures a single product that needs a large amount of labor time. overhead cost is applied

User Account

All Pages