Relvant cost of making versus buying
Course:- Managerial Accounting
Reference No.:- EM1349741

Assignment Help
Assignment Help >> Managerial Accounting

James Co. has two divisions,A and B,each operate as a profit center.A charges B $35 per unit for each unit transferred to B. Other data for A are below:

Variable cost per unit $30
Fixed costs $10,000
Annual sales to B 5,000 units
Annual sales to outsiders 50,000 units

A is planning to raise its transfer price to $50 per unit .Division B can purchase units from outsiders for $40 each, but doing so would idle A's facilities that are now committed to producing units for B.Division A can't increase its sales to outsiders .From the perspective of the company as a whole ,from Whom should Division B acquire the units, assuming B's market is unaffected?

A. Outside vendors.

B. Division A,but only at the variable cost per unit.

C. Division A,but only until fixed costs are covered ,then from outside vendors.

D. Division A,despite the increased transfer price.

Slect the correct answer and why?

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Managerial Accounting) Materials
Write a five- to seven-page financial statement analysis of a public company. - Discuss the financial health of this company with the ultimate goal of making a recommendation
Stevenson Company is divided into two operating divisions: Battery and Small Motors. Assume that Stevenson uses the sequential method to allocate support department costs to t
For Questions 1 through 3, create a chart to classify and identify a cost driver for each of the costs provided in the text. The chart should be included as an appendix to
On the first day if the fiscal year a company issues a 4000000 6% five year bond that pays semiannual interest of 120000 receiving cash of 4175041. Journalize the first intere
Determine the best sales mix and Rank the services offered in order of their profitability and what additional amount of total contribution margin would be generated if your r
You are a retail store manager (big box retailer) that needs to present the district team with a proposal. A family owned sporting goods store is closing. You (the store mana
Prepare a sales budget, by month and in total, for the third quarter. Also prepare a schedule of expected cash collections, by month and in total, for the third quarter.
Identify and analyse the factors which influence capital budgeting decisions that required efficient investment decisions over competing concerns - Critically analyse the re