8.16 The Safeway division of Amco Prod ucts man ufact ures batteries that it sells pri Alpha-Beta division for inclusion wit h that division 's main prod uct. In 19A, half of were sold to outside companies at a price of $2 each. The remain ing batteries Alpha-Beta division. Cost data for 198 for the Safeway division are given below Prod uction I 20,000 u nits Variable man ufact urin g costs $120,000 Fixed overhead $60,000 Selling expenses (all variable) $30,000 Administrative expenses (all fixed) $20,000 1. What should be the transfer price for the bat teries if the company uses: ( a ) Market price? ( b) Variable cost? (c) A negotiated transfer price that will yield a mark up of 20 percen t on its (absorption cost) for Safeway? 2. Prepare a schedule of Safeway division's contribution margin for each of pricing alternatives computed in part 1.
Solution ID:10137803 | Question answered on 16-Oct-2016
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