Question

Planet Company had the following historical accounting data per unit: Direct materials $70 Direct labor 40 Variable overhead 20 Fixed overhead 30 Variable selling expenses 50 Fixed selling expenses 12 The units are normally transferred internally from Division A to Division B. The units also may be sold externally for $220 per unit. The minimum profit level accepted by the company is a markup of 35%. There were no beginning or ending inventories. What would be the transfer price if Division A uses full cost plus markup

Answer 1

To calculate the transfer price using full cost plus markup, add up the direct materials, labor, overhead, and selling expenses per unit. Then, calculate the markup based on the full cost. Finally, add the full cost and markup to find the transfer price.

Step-by-step explanation:

To calculate the transfer price using full cost plus markup, we need to determine the full cost per unit first. The full cost per unit is calculated by adding up the direct materials, direct labor, variable overhead, fixed overhead, variable selling expenses, and fixed selling expenses. In this case, the full cost per unit would be $70 + $40 + $20 + $30 + $50 + $12 = $222.

Next, we need to calculate the markup percentage, which is 35% of the full cost per unit. 35% of $222 is $77.7. To find the transfer price, we add the full cost per unit to the markup amount. $222 + $77.7 = $299.7.

Therefore, the transfer price would be $299.7 per unit if Division A uses full cost plus markup.

Answer 2

$216

Step-by-step explanation:

Calculation to determine What would be the transfer price if Division A uses full cost plus markup

Using this formula

Transfer price = Direct Material + Direct Labor + Variable Overhead + Fixed Overhead

Let plug in the formula

Transfer price = (70 + 40 + 20 + 30)+(70 + 40 + 20 + 30*35)

Transfer price = 160+(160*35%)

Transfer price = 160 + 56

Transfer price = 216

Therefore What would be the transfer price if Division A uses full cost plus markup is $216