Signature Scents has two divisions: the Cologne Division and the Bottle Division

Question

Signature Scents has two divisions: the Cologne Division and the Bottle Division. The Bottle Division produces containers that can be used by the Cologne Division. The Bottle Division's variable manufacturing cost is $2, shipping cost is $0.10, and the external sales price is $3. No shipping costs are incurred on sales to the Cologne Division, and the Cologne Division can purchase similar containers in the external market for $2.60.

Can You show the work for each question, thanks!

8. Assume the Bottle Division has no excess capacity and could sell everything it produced externally. Using the general rule, the transfer price from the Bottle Division to the Cologne Division would be:
A. $2.00.
B. $2.10.
C. $2.60.
D. $2.90.
E. $3.00.

9. The maximum amount the Cologne Division would be willing to pay for each bottle transferred would be:
A. $2.00.
B. $2.10.
C. $2.60.
D. $2.90.
E. $3.00.

10. The Bottle Division has sufficient capacity to meet all external market demands in addition to meeting the demands of the Cologne Division. Using the general rule, the transfer price from the Bottle Division to the Cologne Division would be:
A. $2.00.
B. $2.10.
C. $2.60.
D. $2.90.
E. $3.00.

Explanation / Answer

8. Transfer price = $ 3- $ 0.10= $ 2.90, As bottle division has no capacity, therefore transfer price will be the market price minus saving in the cost.

       i.e D = $ 2.90

9. Maximum transfer price that Colonge division willing to Pay $ 2.60 per unit as the same is available in market at this rate.

    i.e C - $ 2.60

to produce the bottle.

i.e A - $ 2.00

8. Transfer price = $ 3- $ 0.10= $ 2.90, As bottle division has no capacity, therefore transfer price will be the market price minus saving in the cost.

       i.e D = $ 2.90

9. Maximum transfer price that Colonge division willing to Pay $ 2.60 per unit as the same is available in market at this rate.

    i.e C - $ 2.60

10 The Transfer price will be equal to the Variable manufacturing cost = $ 2 per bottle, as bottle division has the idle capacity

to produce the bottle.

i.e A - $ 2.00

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