Question

Planet Company had the following historical accounting data per unit: Direct materials $70 Direct labor 40 Variable overhead 20 Fixed overhead 30 Variable selling expenses 50 Fixed selling expenses 12 The units are normally transferred internally from Division A to Division B. The units also may be sold externally for $220 per unit. The minimum profit level accepted by the company is a markup of 35%. There were no beginning or ending inventories. What would be the transfer price if Division A uses full cost plus markup

Answer 1

Answer:

$216

Explanation:

Calculation to determine What would be the transfer price if Division A uses full cost plus markup

Using this formula

Transfer price = Direct Material + Direct Labor + Variable Overhead + Fixed Overhead

Let plug in the formula

Transfer price = (70 + 40 + 20 + 30)+(70 + 40 + 20 + 30*35)

Transfer price = 160+(160*35%)

Transfer price = 160 + 56

Transfer price = 216

Therefore What would be the transfer price if Division A uses full cost plus markup is $216