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What transfer price should used if chiplets currently sells

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Reference no: EM132520464

Chiplets Division makes peanut-butter-flavoured chips that can be sold on the outside market at a current market price of $22 per kilogram. Alternatively, the chips can be sold to PB Deluxe Division for use in its high-end cookie products. Chiplets estimates the chips to have the following costs (per kilogram and based on a capacity of 30,000 kilograms per month) in dollars ($):

Materials                 5.00

Labour                    1.50

Variable overhead     3.50

Fixed overhead       5.00

  • PB Deluxe Division would like to purchase 7,000 kilograms per month. It would prefer to purchase from Chiplets Division, but it does have an external supplier willing to provide the chips at the current market price. PB Deluxe Division prefers to purchase all the chips from a single source.

Question a. What transfer price should be used if Chiplets currently sells 27,000 chips in the outside market?

Question b. What transfer price should be used if Chiplets currently sells 30,000 chips in the outside market?

Question c. What transfer price should be used if Chiplets currently sells 20,000 chips in the outside market?

Reference no: EM132520464

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