Planet Company had the following historical accounting data per unit:

The units are normally transferred internally from Division A to Division B.The units also may be sold externally for $220 per unit.The minimum profit level accepted by the company is a markup of 35%.There were no beginning or ending inventories.
What would be the transfer price if Division A uses full cost plus markup?

A) $216
B) $198
C) $136
D) $129

Question

Planet Company had the following historical accounting data per unit:

The units are normally transferred internally from Division A to Division B.The units also may be sold externally for $220 per unit.The minimum profit level accepted by the company is a markup of 35%.There were no beginning or ending inventories.
What would be the transfer price if Division A uses full cost plus markup?

A) $216 
B) $198 
C) $136 
D) $129

Quizplus · Accepted Answer

SUPPORTING CALCULATIONS: 
 Transfer price based on full cost plus a markup of 35% = Full cost* + (Full cost* × Markup percentage) = $160 + ($160 × 35%) = $216
*Full cost = (Direct materials + Direct labor + Variable overhead + Fixed overhead) = ($70 + $40 + $20 + $30) = $160

Planet Company Had the Following Historical Accounting Data Per Unit