8.17 The Sattle Automobile Company has j ust acquired a battery division. The com division is presently purchasing 100,000 batteries each year from Bendox Corpo price of $24 per battery. Through the acquisition of the battery division top mana feels that t he compa ny's motor division should begin to purchase its batteries fr acquired ba ttery division. The battery division 's cost per battery is as follows: Direct materials $12 Direct labor 4 Variable overhead 2 Fixed overhead 2* Total unit cost $20 *Based on 250.000 u nits of capacity of the battery division. Top ma nagement wishes to decide on the transfer price to be cha rged on the i transfers. 1. Explain why each of the following would or would n ot be an appropriate tra (a) $24 (b) $20 (c) $21 (d) $18 2. Assumi ng that t he battery division is operating at f ull capacity, explain wh transfer prices given in parts 1(a ) t hrough 1(d ) would or would not be an price.
Solution ID:10137808 | Question answered on 16-Oct-2016
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