Question

Flash ECard Manufacturing manufactures software parts for the computer software systems that produce ecards. The Flash II part is currently manufactured in the Computer Department. The Data Department also produces the part and the plant has excess capacity to produce the Flash II part. The current market price of the Flash II part is​ $700. The managerial accountant reported the following manufacturing costs and variable expense​ data: Flash ECard Manufacturing Manufacturing Costs and Variable Expense Report Flash Component Direct materials ​$810 Direct labor ​$160 Variable manufacturing overhead ​$140 Fixed manufacturing overhead​ (current production​ level) ​$185 Variable selling expenses​ (only incurred on sales to outside​ consumers) ​$136 If the highest acceptable transfer price is​ $700 in the​ market, what is the lowest acceptable inhouse price the Data Department should receive to produce the part inhouse at the Computer​ Department? "810"

Answer 1

the lowest acceptable inhouse price the Data Department is $1,110

Step-by-step explanation:

The computation of the lowest acceptable inhouse price the Data Department is shown below:

= Direct materials + direct labor + Variable manufacturing overhead

= $810 + $160 + $140

= $1,110

Hence, the lowest acceptable inhouse price the Data Department is $1,110

The above formula should be applied for determining the lowest acceptable inhouse price is as follows: