Oller Corporation Oller Corporation produces various products used in the construction industry. The Plumbing Division produces and sells 100,000 copper fittings each month. Relevant information for last month follows:
Top-level managers are trying to determine how a transfer price can be set on a transfer of 10,000 of the copper fittings from the Plumbing Division to the Bathroom Products Division.
Refer to Oller Corporation. A transfer price based on variable cost will be set at ____ per unit.

Question

Oller Corporation Oller Corporation produces various products used in the construction industry. The Plumbing Division produces and sells 100,000 copper fittings each month. Relevant information for last month follows:
 Top-level managers are trying to determine how a transfer price can be set on a transfer of 10,000 of the copper fittings from the Plumbing Division to the Bathroom Products Division.
Refer to Oller Corporation. A transfer price based on variable cost will be set at ____ per unit.

Quizplus · Accepted Answer

To calculate the transfer price based on variable cost, we need to consider only the incremental costs of producing and selling an additional 10,000 copper fittings. From the given information, we know that variable costs per unit are:
Direct materials: $0.20
Direct labor: $0.15
Variable overhead: $0.30
Thus, the total variable cost per unit is:
$0.20 + $0.15 + $0.30 = $0.65
Therefore, the transfer price based on variable cost will be set at $0.65 per unit.

Oller Corporation Oller Corporation Produces Various Products Used in the Construction