[The following information applies to the questions displayed below.] Clearview

Question

[The following information applies to the questions displayed below.] Clearview Window Company manufactures windows for the home-building industry. The window frames are produced in the Frame Division. The frames are then transferred to the Glass Division, where the glass and hardware are installed. The company's best-selling product is a three-by-four-foot, doublepaned operable window The Frame Division also can sell frames directly to custom home builders, who install the glass and hardware. The sales price for a frame is $180. The Glass Division sells its finished windows for $400. The markets for both frames and finished windows exhibit perfect competition The standard variable cost of the window is detailed as follows: Frame DivisionGlass Division Direct material Direct labor Variable overhead Total $ 32 50 58 $140 $ 58* 32 58 $148 Not including the transfer price for the frame Problem 13-46 Part 1 Assume that there is no excess capacity in the Frame Division Required: 1-a. Use the general rule to compute the transfer price for window frames 1-b. Calculate the transfer price if it is based on standard variable cost with a 10 percent markup 1-a. Transfer price 1-b. Transfer price

Explanation / Answer

1a Transfer price = $180 b Transfer price =140*1.1 = $154

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