1)
Giga-Stuff, Inc. has a number of divisions. One division, Sophistosand, makes a component, component X, that is used in the manufacture of DVD players. Another
division, Videostuff, makes DVD players that use component X and needs 60,000 units of component X per year. Sophistosand incurs the following costs for one
unit of component X:
| Direct materials |
$0.30 |
| Direct labor |
0.15 |
| Variable overhead |
0.70 |
| Fixed overhead |
1.00 |
| Total |
$2.15 |
Sophistosand has capacity to make 400,000 units of component X per year, but due to a soft market, only plans to produce and sell 320,000 units next year.
Videostuff currently buys component X from an outside supplier for $2.50 each (the same price that Sophistosand receives). Refer to Figure 12-4. Assume that
Sophistosand and Videostuff have agreed on a transfer price of $2.20. What is the total benefit for Sophistosand?
|
$18,000 |
|||||||||||||||||||||||||||||
|
$132,000 |
|||||||||||||||||||||||||||||
|
$63,000 |
|||||||||||||||||||||||||||||
|
$69,000 |
|||||||||||||||||||||||||||||
|
$81,000
2)
Sophistosand has capacity to make 400,000 units of component X per year, but due to a soft market, only plans to produce and sell
|
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