Question

Flash EminusCard Manufacturing manufactures software parts for the computer software systems that produce eminuscards. 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 $ 500. The managerial accountant reported the following manufacturing costs and variable expense​ data: Flash EminusCard Manufacturing Manufacturing Costs and Variable Expense Report Flash Component Direct materials $ 860 Direct labor $ 80 Variable manufacturing overhead $ 150 Fixed manufacturing overhead​ (current production​ level) $ 155 Variable selling expenses​ (only incurred on sales to outside​ consumers) $ 132 If the highest acceptable transfer price is $ 500 in the​ market, what is the lowest acceptable inminushouse price the Data Department should receive to produce the part inminushouse at the Computer​ Department?

Answer 1

$1,090

Step-by-step explanation:

The lowest acceptable price for Data Department is the minimum transfer transfer price.

The minimum transfer price is defined as a price that is acceptable to the transferring division and out of a range of acceptable prices, it is that would be the best for the company.

Mini Transfer price = Variable unit costs - internal savings + opportunity cost

Note : the plant has excess capacity to produce the Flash II part, therefore there is no opportunity cost

Mini Transfer price = $ 860+ $ 80 + $ 150

= $1,090

Therefore the lowest acceptable house price the Data Department should receive to produce the part in house at the Computer​ Department is $1,090