Green Yard Company, a division of Lawn Supplies, Inc., produces lawn mowers. Green Yard sells lawn mowers to home improvement stores, as well as to Lawn Supplies, Inc. The following information is available for Green Yard's mowers:
Lawn Supplies, Inc. can purchase comparable lawn mowers from an outside supplier for $340. In order to ensure a reliable supply, the management of Lawn Supplies, Inc. ordered Green Yard to provide 100,000 lawn mowers per year at a transfer price of $340 per unit. Green Yard is currently operating at full capacity. It could avoid $6 per unit of variable selling costs by selling internally.
Instructions
1. Compute the minimum transfer price that Green Yard should be required to accept.
2. Compute the increase (decrease) in contribution margin for Lawn Supplies, Inc. for this transfer.
Correct Answer:
Verified
View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Q105: Variable costs of units sold internally will
Q108: The maximum transfer price from the buying
Q121: Chuck's Classic Cars restores classic automobiles to
Q122: Spirit Manufacturing is a division of Birch
Q123: Forrest Painting Service has budgeted the following
Q125: In the cost-plus pricing formula, the target
Q126: The three approaches for determining a transfer
Q127: The Pacific Company is a multidivisional company.
Q128: The formula for the minimum transfer price
Q129: The transfer of goods between divisions of
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents