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

Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
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
Discuss whether the non-disclosure of information about operations in Pakistan and Nigeria would be material and comment on the accounting treatment of the debenture issue in
Processing first begins in the Boiling department. After boiling of all the materials have been completed, the product is transferred to Cooling department. In the Cooling dep
Calculate Golden Gate Construction Associates' weighted-average cost of capital - Calculate the economic value added (EVA) for each of Golden Gate Construction Associates div
AB Company specialises in electronic products. Division A makes integrated circuits and sells 90% of its output to outside companies. This division is operating well below
Why might a company want to engage in off-balance sheet financing and what are the four options that manufacturing and service companies have to transform breakeven or loss
Prepare a new contribution format segmented income statement for the month. Adjust the allocation of equipment depreciation and warehouse rent as indicated by the additional
Advice on the reliance of financial ratios analysis and budgetary controls for co-ordination and control of the group performance. Critical analysis of the company's manageme
Explain the process of preparing an operations budget. Describe the budgeting control process and explain how significant variances are determined. What are the forecasted rev