Finance Question-The commando motorcycle company
Not what you're looking for?
The commando motorcycle company has decided to become decentralized and split it's operations into two divisions. Motor and Assembly.Both divisions will be treated as investment centers. The motor division is currently operating at it's capacity of 30,000 motors per year
Direct Materials = $30
Direct Labor = 50
Variable Manufacturing Overhead = 20
Fixed Manufacturing Overhead = 25
Variable selling and administrative = 5
Fixed selling and administrative = 10
Total cost per motor = $140
Motor sells 10,000 of its motors to a snowmobile manufacturer and transfers the remaining 20,000 to the assembly division. The two divisions are currently in a debate over an approximate transfer price to charge for the 20,000 motors. Motor currently charges the snowmobile manufacturer $200 per motor. The final selling price of the motorcycles that Commando produces is $7200 per cycle. This selling price will not change regardless of the transfer price charged between the two divisions. Motor has no market for the 20,000 motors if they are not transferred to assembly. Variable selling and administrative costs are incurred on both internal and external sales.
What is the lowest acceptable transfer price from the viewpoint of the selling division? $35, $105, $125, or $140 per motor
Assume that the assembly division wants to also purchase the additional 10,000 motors that the motor division currently sells to the snowmobile manufacturer. What is the lowest acceptable transfer price for these additional motors from the viewpoint of the selling division?
$200, $105, $125, or $140 per motor
Purchase this Solution
Solution Summary
The commando motorcycle company is examined.
Solution Preview
The commando motorcycle company has decided to become decentralized and split it's operations into two divisions. Motor and Assembly.Both divisions will be treated as investment centers. The motor division is currently operating at it's capacity of 30,000 motors per year
Direct Materials = $30
Direct Labor = 50
Variable Manufacturing Overhead = 20
Fixed Manufacturing Overhead = 25
Variable selling and administrative = 5
Fixed selling and administrative = 10
Total cost per motor = $140
Motor sells 10,000 of its motors to a snowmobile manufacturer and transfers ...
Education
- BA, Ain Shams University, Cairo Egypt
- MBA, California State University, Sacramento
Recent Feedback
- "ty i have more need help with"
- "ty i have jmore i need help with"
- "great help"
- "excellent help"
- "Very helpful and easy to understand."
Purchase this Solution
Free BrainMass Quizzes
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Lean your Process
This quiz will help you understand the basic concepts of Lean.
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media