Southfield Division offers its product to outside markets for $134. It incurs variable costs of $59 unit and fixed costs of $148,500 per month based on monthly production of 23,900 units. North Division can acquire the product from an alternate supplier for $139 per unit or from Southwest: Division for a transfer price of $134 plus $6 per unit in transportation costs. Required: a. What are the costs and benefits of the alternatives available to Southfield Division and North Division with respect to the transfer of Southfield Division's product? Assume that Southfield Division can market all that it can produce. b. How would your answer change if Southfield Division had idle capacity sufficient to cover all Northfield Division's needs? a. Net benefit b. Net benefit per unit per unit

Southfield Division offers its product to outside markets for $134. It incurs variable costs of $59 unit and fixed costs of $148,500 per month based on monthly production of 23,900 units. North Division can acquire the product from an alternate supplier for $139 per unit or from Southwest: Division for a transfer price of $134 plus $6 per unit in transportation costs. Required: a. What are the costs and benefits of the alternatives available to Southfield Division and North Division with respect to the transfer of Southfield Division's product? Assume that Southfield Division can market all that it can produce. b. How would your answer change if Southfield Division had idle capacity sufficient to cover all Northfield Division's needs? a. Net benefit b. Net benefit per unit per unit

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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