1. The following data has been taken from the accounting records of Curtis Manuf
ID: 2497151 • Letter: 1
Question
1.
The following data has been taken from the accounting records of Curtis Manufacturing Company for the current year:
Required:
Compute the amount of raw materials moved into production during the period.
Compute the amount transferred to finished goods during the period.
Compute the amount of goods sold during the period.
2.
The Assembly Division of Mounds Corporation makes a component part that the Packaging Division needs to purchase. The Assembly Division’s variable cost of manufacturing the component is $25 per unit. The component is also available on the open market at a price of $52. The Packaging Division needs 800 units of the component and the Assembly Division has excess capacity of 1,000 units.
Required:
Calculate the cost-based-transfer price that the Assembly division should charge the Packaging division.
Calculate the market-based transfer price that the Assembly division should charge the Packaging division.
Sales $600,000 Purchases of raw materials 350,000 Direct labor cost during period 120,000 Manufacturing overhead incurred during period 60,000 Raw Materials Inventory, beginning 20,000 Raw materials Inventory, ending 25,000 Work in Process Inventory, beginning 47,000 Work in Process Inventory, ending 32,000 Finished Goods Inventory, beginning 75,000 Finished Goods Inventory, ending 82,000Explanation / Answer
Note: It is assumed that the labour cost is entirely direct and manufacturing overheads are alsofully absorbed to production.
2. Cost Based Transfer Price
The requirement of the packaging division is 800 units. If assemby division transfers the product at cost; that is at $25 per unit, the cost of purchase of packaging division comes down to $5 per unit instead of $52 from open market. Although the profit on 800 units is foregone by the assembly division, it will be offset by increased profit of packaging division. The corporate profitablity will not be affected. The remaining capacity of 200 units can be sold at $52 in the open market by assembly division.
Market Based Transfer Pricing
In ths case, the product willl be sold to packaging division at market price.The cost for packaging division will be the same as purchasing from the market. But the profit of assembly division will be high due to sale at market price. The corporate profit remains unchanged with an exception that the divisional proft varies.
Raw Material Consumption a Beginnign Inventory 20000 b Ending Inventory 25000 c Purchase 350000 Raw Material issues to production (a+c-b) 345000Related Questions
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