The Mukilteo Division of Snohomish Corp. produces and sells a product to outside and internal customers. Per-unit data collected from its operations include: $$\begin{array} { l r }
\text { Outside sales price } & \$ 640 \
\text { Direct materials } & 105 \
\text { Direct labour } & 250 \
\text { Fixed overhead } & 180
\end{array}$$ If Mukilteo is operating at full capacity and selling solely to outside customers, what price should another division pay for Mukilteo's product?

Question

The Mukilteo Division of Snohomish Corp. produces and sells a product to outside and internal customers. Per-unit data collected from its operations include: $$\begin{array} { l r } 
\text { Outside sales price } & \$ 640 \
\text { Direct materials } & 105 \
\text { Direct labour } & 250 \
\text { Fixed overhead } & 180
\end{array}$$ If Mukilteo is operating at full capacity and selling solely to outside customers, what price should another division pay for Mukilteo's product?

Quizplus · Accepted Answer

When operating at full capacity and selling solely to outside customers, the price another division should pay for Mukilteo's product would ideally be the same as the outside sales price, which is $640. This ensures the selling division does not lose potential profits from external sales.

The Mukilteo Division of Snohomish Corp If Mukilteo Is Operating at Full Capacity and Selling Solely