Solution-What transfer price would you recommend

What transfer price would you recommend

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Reference no: EM133093320

Question - San Jose Company operates a Manufacturing Division and an Assembly Division. Both divisions are evaluated as profit centers. Assembly buys components from Manufacturing and assembles them for sale. Manufacturing sells many components to third parties in addition to Assembly. Selected data from the two operations follow.

	Manufacturing	Assembly
Capacity (units)	408,000	208,000
Sales price^a	$416	$1,340
Variable costs^b	$200	$496
Fixed costs	$40,080,000	$24,080,000

^a For Manufacturing, this is the price to third parties.

^b For Assembly, this does not include the transfer price paid to Manufacturing.

Required -

a. Current production levels in Manufacturing are 208,000 units. Assembly requests an additional 48,000 units to produce a special order. What transfer price would you recommend?

b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend?

c. Suppose Manufacturing is operating at 384,000 units. What transfer price would you recommend?

Reference no: EM133093320

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What transfer price would you recommend

Reference no: EM133093320

Reference no: EM133093320

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