In the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below:   Case 1 Case 2 Division A:         Capacity in units 100,000 100,000     Number of units sold externally 100,000 60,000     Market selling price $90 $75     Variable costs per unit 73 58     Fixed costs per unit based on capacity 10 10       Division B:         Number of units needed for production 40,000 40,000     Purchase price per unit from external supplier $86 $74 The company uses the opportunity cost approach to transfer pricing. Which case should not be transferred internally? a.Both should be transferred internally. b.Neither should be transferred internally. c.Case 1

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
In the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below:

  Case 1 Case 2
Division A:    
    Capacity in units 100,000 100,000
    Number of units sold externally 100,000 60,000
    Market selling price $90 $75
    Variable costs per unit 73 58
    Fixed costs per unit based on capacity 10 10
     
Division B:    
    Number of units needed for production 40,000 40,000
    Purchase price per unit from external supplier $86 $74

The company uses the opportunity cost approach to transfer pricing. Which case should not be transferred internally?
a.Both should be transferred internally.
b.Neither should be transferred internally.
c.Case 1
d.Case 2
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education