Naperville Company has two divisions: the Mixing Division and Bottling Division. The Mixing Division sells beverage mix to the Bottling Division. Standard costs for the Mixing Division are as follows:
$$\begin{array} { l r }
\text { Direct materials } & \$ 2.00 \text { per gallon } \
\text { Direct labor } & 0.80 \text { per gallon }
\end{array}$$ The Mixing Division uses the following predetermined overhead rate:
$$\begin{array} { l r }
\text { Variable overhead } & \$ 1.20 \text { per gallon } \
\text { Fixed overhead } &\underline{ 0.80 \text { per gallon }} \
\text { Total } & \$ 2.00 \text { per gallon }
\end{array}$$ What is the transfer price for the beverage mix per gallon based on standard absorption cost plus a markup of 30 percent?

Question

Naperville Company has two divisions: the Mixing Division and Bottling Division. The Mixing Division sells beverage mix to the Bottling Division. Standard costs for the Mixing Division are as follows:
$$\begin{array} { l r } 
\text { Direct materials } & \$ 2.00 \text { per gallon } \
\text { Direct labor } & 0.80 \text { per gallon }
\end{array}$$ The Mixing Division uses the following predetermined overhead rate:
$$\begin{array} { l r } 
\text { Variable overhead } & \$ 1.20 \text { per gallon } \
\text { Fixed overhead } &\underline{ 0.80 \text { per gallon }} \
\text { Total } & \$ 2.00 \text { per gallon }
\end{array}$$ What is the transfer price for the beverage mix per gallon based on standard absorption cost plus a markup of 30 percent?

Quizplus · Accepted Answer

The Answer of Naperville Company has two divisions: the Mixing Division and Bottling Division. The Mixing Division sells beverage mix to the Bottling Division. Standard costs for the Mixing Division are as follows:
$$\begin{array} { l r } 
\text { Direct materials } & \$ 2.00 \text { per gallon } \
\text { Direct labor } & 0.80 \text { per gallon }
\end{array}$$ The Mixing Division uses the following predetermined overhead rate:
$$\begin{array} { l r } 
\text { Variable overhead } & \$ 1.20 \text { per gallon } \
\text { Fixed overhead } &\underline{ 0.80 \text { per gallon }} \
\text { Total } & \$ 2.00 \text { per gallon }
\end{array}$$ What is the transfer price for the beverage mix per gallon based on standard absorption cost plus a markup of 30 percent?