Materials used by the industrial division of lemaster, Ask an Expert

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Materials used by the Industrial Division of LeMaster Manufacturing are currently purchased from outside suppliers at a cost of $120per unit. However, the same materials are available from the Materials Division. The Material Division has unused capacity and can produce the materials needed by the Industrial Division at avariable cost of $95 per unit. Assume that a transfer price of $110 has been established and that 40,000 units of materials are transferred, with no reduction in the Materials Division's current sales.

a. How much would LeMaster Manufacturing's total income from operations increase?
b. How much would the Industrial Division's income from operationsincrease?
c. How much would the Materials Division's income from operations increase?
d. If the negotiated price approach is used, what would be the range of acceptable transfer prices and why?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9797870

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