Reference no: EM133189778

Questions -

Q1. The Table division of Timber Products, Inc. sells all of its output to the Finishing Division of the company. The only product of the Table division is an unfinished table line that is used by the Finishing Division. The retail price of the tables is P5,000 per table. Production quantity and cost data are as follows:

Tables 1,000

Direct materials P450,000

Direct labor 300,000

Factory overhead (25% variable) 300,000

Operating expenses (80% fixed) 500,000

Required - Determine the transfer price for a table using the following:

1. Variable product costs plus 20%.

2. Absorption costs plus 20%

3. Variable cost

4. Total costs plus 10%

Need solutions for 1,2,3,4. These are the answers.

1. Variable product costs plus 20%. - P990.00

2. Absorption costs plus 20% - P1,260.00

3. Variable cost - P925.00

4. Total costs plus 10% - P1,705.00

Q2. Division X makes and sells a single product. Presently, it sells 15,000 units per year to outside customers at P240 per unit. The annual capacity is 20,000 units and the variable cost to make each unit is P160. All selling expenses are fixed. Division Y would like to buy 10,000 units from Division X. What is the minimum transfer price using the transfer pricing formula?