Gravel and Sand Corporation has two divisions,Refining and Production.The company's primary product is Quick-dry Cement Mix.Each division's costs are provided below:

The Refining Division has been operating at a capacity of 42,000 bags a day and usually purchases 25,750 from the Production Division and 16,250 bags of cement mix from other suppliers at $62 per bag.
Required
Based on the provided information,what is the transfer price per bag from the Production Division to the Refining Division,assuming the method used to place a value on each bag of cement mix is 190% of variable costs? Compute the transfer price per bag from the Production Division to the Refining Division,assuming the method used to place a value on each bag of cement mix is 115% of full costs.Assume 230 bags are transformed from the Production Division to the Refining Division for a transfer price of $20 per bag.The Refining Division sells the 230 bags at a price of $105 each to customers.What is the operating income of both divisions together?

Question

Gravel and Sand Corporation has two divisions,Refining and Production.The company's primary product is Quick-dry Cement Mix.Each division's costs are provided below:

The Refining Division has been operating at a capacity of 42,000 bags a day and usually purchases 25,750 from the Production Division and 16,250 bags of cement mix from other suppliers at $62 per bag.
Required
Based on the provided information,what is the transfer price per bag from the Production Division to the Refining Division,assuming the method used to place a value on each bag of cement mix is 190% of variable costs? Compute the transfer price per bag from the Production Division to the Refining Division,assuming the method used to place a value on each bag of cement mix is 115% of full costs.Assume 230 bags are transformed from the Production Division to the Refining Division for a transfer price of $20 per bag.The Refining Division sells the 230 bags at a price of $105 each to customers.What is the operating income of both divisions together?

Quizplus · Accepted Answer

A)Transfer price per bag from Production Division to Refining Division: [(1.9 × $11)] = $20.90
Transfer price assuming 190% variable costs: [(1.15 × ($11 + $7))] = $20.70
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Gravel and Sand Corporation Has Two Divisions,Refining and Production