What is the minimum transfer price from polk perspective

Reference no: EM132782808

Avery Company has two divisions, Polk and Bishop. Polk produces an item that Bishop could use in its production. Bishop currently is purchasing 25,000 units from an outside supplier for P24 per unit. Polk is currently operating at less than its full capacity of 600,000 units and has variable costs of P12 per unit. The full cost to manufacture the unit is P18. Polk currently sells 450,000 units at a selling price of P25.50 per unit.

Question a. What will be the effect on Avery Company's operating profit if the transfer is made internally?

Question b. What is the minimum transfer price from Polk's perspective?

Question c. What is the maximum transfer price from Bishop's perspective?

Reference no: EM132782808

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