What will be effect on washington company operating profit

Reference no: EM132782810

Washington Company has two divisions, Jefferson and Adams. Jefferson produces an item that Adams could use in its production. Adams currently is purchasing 100,000 units from an outside supplier for P78.40 per unit. Jefferson is currently operating at full capacity of 900,000 units and has variable costs of P46.40 per unit. The full cost to manufacture the unit is P59.20. Jefferson currently sells 900,000 units at a selling price of P86.40 per unit.

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

Question b. What will be the change in profits for Jefferson if the transfer price is P67.20 per unit?

Question c. What will be the change in profits for Adams if the transfer price is P67.20 per unit?

Reference no: EM132782810

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