ACCT202 Teng Final Exam Fall 2017 Use the following to answer question 27 The Lu

Question

ACCT202 Teng Final Exam Fall 2017 Use the following to answer question 27 The Lumber Division of Paul Bunyon Homes Inc. produces and sells lumber that can be sold to outside customers or within the company to the Construction Division. The following data have been gathered for the coming period: Lumber Division Capacity Price per board foot Variable production cost per bd f. Variable selling cost per bd. ft Board fect neodod 200,000 board feet $2.50 S1.25 0.50 Construction Division: 60,000 $2.00 Outside price paid per bd. ft. If the Lumber Division sells to the Construction Division, $0.35 per board foot can be saved in shipping costs. 27. If current outside sales are 130,000 board feet, what is the minimum transfer price that the Lumber Division could accept? A) S1.25 B) $1.40 C) S1.75 D) $2.50 The projection of financial position at the end of the budget period is found on the A) budgeted income statement. B) cash budget. C) budgeted balance sheet. D) sales budget. 28· 29. Dillon has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units Dillon used 3,850 hours of labor at a total cost of $46,970. Dillon's labor price variance is A) $770 U B) $800 U C) $1,030F. D) $1,930 F Page 7

Explanation / Answer

Solution.

The correct option is B. $1.40

Minimum Transfer price.

Variable production cost per bd ft. = $1.25

Variable selling cost per bd ft.       = $0.50

Less: Shipping cost saving           = ($0.35)

Minimum transfer price             = $1.40

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