The machining division of Cullumber International has a capacity of 2, 100 units. Its sales and cost data are:Selling price per unit$85Variable manufacturing costs per unit20Variable selling costs per unit4Total fixed manufacturing overhead213, 300The machining division is currently selling 1,900 units to outside customers, and the assembly division of Cullumber International wants to purchase 400 units from machining. If the transaction takes place, the variable selling costs per unit on the units transferred to assembly will be $0/unit, and not $4/unit. If Cullumber's assembly division is currently buying from an outside supplier at $80 per unit, what will be the effect on overall company profits if internal sales for 400 units take place at the optimum transfer price?
The machining division of Cullumber International has a capacity of 2, 100 units. Its sales and cost data are:Selling price per unit$85Variable manufacturing costs per unit20Variable selling costs per unit4Total fixed manufacturing overhead213, 300The machining division is currently selling 1,900 units to outside customers, and the assembly division of Cullumber International wants to purchase 400 units from machining. If the transaction takes place, the variable selling costs per unit on the units transferred to assembly will be $0/unit, and not $4/unit. If Cullumber's assembly division is currently buying from an outside supplier at $80 per unit, what will be the effect on overall company profits if internal sales for 400 units take place at the optimum transfer price?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The machining division of Cullumber International has a capacity of 2, 100 units. Its sales and cost data
are:Selling price per unit$85Variable manufacturing costs per unit20Variable selling costs per unit4 Total fixed
manufacturing overhead213, 300The machining division is currently selling 1,900 units to outside customers,
and the assembly division of Cullumber International wants to purchase 400 units from machining. If the
transaction takes place, the variable selling costs per unit on the units transferred to assembly will be $0/unit,
and not $4/unit. If Cullumber's assembly division is currently buying from an outside supplier at $80 per
unit, what will be the effect on overall company profits if internal sales for 400 units take place at the
optimum transfer price?
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