The Glass Division of a company makes glass vases,which have the following unit costs:
The Florist Division of the company sells cut flowers and uses the glass vases.The Florist Division uses 10,000 vases per year and currently buys them from an outside supplier for $4 each.The Glass Division produces and sells 100,000 glass vases per year and sells them on the outside market for $4 each.Vases sold outside incur the sales commission; this commission would not be paid on internal transfers.The Glass Division and the Florist Division managers just met and agreed on a transfer price of $3.75 per vase.Is this a good idea for each division? Explain.
$$\begin{array} { l r }
\text { Direct materials } & \$ 0.20 \
\text { Direct labour } & 0.35 \
\text { Variable overhead } & 0.15 \
\text { Fixed overhead } & 1.30 \
\text { Selling commission } & 0.50
\end{array}$$

Question

The Glass Division of a company makes glass vases,which have the following unit costs:
The Florist Division of the company sells cut flowers and uses the glass vases.The Florist Division uses 10,000 vases per year and currently buys them from an outside supplier for $4 each.The Glass Division produces and sells 100,000 glass vases per year and sells them on the outside market for $4 each.Vases sold outside incur the sales commission; this commission would not be paid on internal transfers.The Glass Division and the Florist Division managers just met and agreed on a transfer price of $3.75 per vase.Is this a good idea for each division? Explain.
 $$\begin{array} { l r } 
\text { Direct materials } & \$ 0.20 \
\text { Direct labour } & 0.35 \
\text { Variable overhead } & 0.15 \
\text { Fixed overhead } & 1.30 \
\text { Selling commission } & 0.50
\end{array}$$

Quizplus · Accepted Answer

The Answer of The Glass Division of a company makes glass vases,which have the following unit costs:
The Florist Division of the company sells cut flowers and uses the glass vases.The Florist Division uses 10,000 vases per year and currently buys them from an outside supplier for $4 each.The Glass Division produces and sells 100,000 glass vases per year and sells them on the outside market for $4 each.Vases sold outside incur the sales commission; this commission would not be paid on internal transfers.The Glass Division and the Florist Division managers just met and agreed on a transfer price of $3.75 per vase.Is this a good idea for each division? Explain.
 $$\begin{array} { l r } 
\text { Direct materials } & \$ 0.20 \
\text { Direct labour } & 0.35 \
\text { Variable overhead } & 0.15 \
\text { Fixed overhead } & 1.30 \
\text { Selling commission } & 0.50
\end{array}$$

The Glass Division of a Company Makes Glass Vases,which Have