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QUESTION 3 CD is a producer of soft drinks, The company has two divisions: DIMision Cand Division D, Division C manufactures metal cans that are sold to Division Dland also to external customers, Division D produces soft drinks and sells them to external customers in the cans that it obtains from Division C. Division C annual budget information N$130 Market selling price per 1 000 cans N$0.04 Variable costs per can N$2.4 million Fixed costs 40 million cans Production capacity 38 million cans External demand for cans 20 million cans Demand from Division D Division D annual budget information Selling price per canned soft drink N$0.50 Other variable costs per canned soft drink (excluding the can) N$0.15 Cost of a can (from Division C) At transfer price Fixed costs N$1 750 000 Transfer Pricing Policy: Division C is required to satisfy the demand of Division D before selling cans externally. The transfer price for a can is full cost-plus 20%. REQUIRED: a) Produce the profit statement for each Division showing sales, costs and the overall total profit of CD. (show external sales and inter-divisional transfers separately where appropriate). b) Suppose Division D supplies the external market with 20 million cansland Division's demand has grown to the total production capacity of Division C from the current 20 million cans. DivisionnCexternal selling price is N$150 per 1,000 cans Calculate the minimum transfer price to Division D

QUESTION 3 CD is a producer of soft drinks, The company has two divisions: DIMision Cand Division D, Division C manufactures metal cans that are sold to Division Dland also to external customers, Division D produces soft drinks and sells them to external customers in the cans that it obtains from Division C. Division C annual budget information N$130 Market selling price per 1 000 cans N$0.04 Variable costs per can N$2.4 million Fixed costs 40 million cans Production capacity 38 million cans External demand for cans 20 million cans Demand from Division D Division D annual budget information Selling price per canned soft drink N$0.50 Other variable costs per canned soft drink (excluding the can) N$0.15 Cost of a can (from Division C) At transfer price Fixed costs N$1 750 000 Transfer Pricing Policy: Division C is required to satisfy the demand of Division D before selling cans externally. The transfer price for a can is full cost-plus 20%. REQUIRED: a) Produce the profit statement for each Division showing sales, costs and the overall total profit of CD. (show external sales and inter-divisional transfers separately where appropriate). b) Suppose Division D supplies the external market with 20 million cansland Division's demand has grown to the total production capacity of Division C from the current 20 million cans. DivisionnCexternal selling price is N$150 per 1,000 cans Calculate the minimum transfer price to Division D

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing
Section: Chapter Questions
Problem 12E
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QUESTION 3 CD Is a producer of soft drinks. The company has two divisions: Division Cand Division D. Division C manufactures metal cans that are sold to Division Djand also to external customers. Division D produces soft drinks and sells them to external customers in the cans that it obtains from Division C. Division C annual budget information N$130 Market selling price per 1 000 cans N$0.04 Variable costs per can N$2.4 million Fixed costs 40 million cans Production capacity 38 million cans External demand for cans 20 million cans Demand from Division D Division D annual budget information Selling price per canned soft drink N$0.50 Other variable costs per canned soft drink (excluding the can) N$0.15 Cost of a can (from Division C) At transfer price Fixed costs N$1 750 000 Transfer Pricing Policy: Division C is required to satisfy the demand of Division D before selling cans externally. The transfer price for a can is full cost-plus 20%. REQUIRED: a) Produce the profit statement for each Division showing sales, costs and the overall total profit of CD. (show external sales and inter-divisional transfers separately where appropriate). b) Suppose Division D supplies the external market with 20 million cansland Division's demand has grown to the total production capacity of Division C from the current 20 million cans. DivisionCexternal selling price is N$150 per 1,000 cans Calculate the minimum transfer price to Division D
Transcribed Image Text:QUESTION 3 CD Is a producer of soft drinks. The company has two divisions: Division Cand Division D. Division C manufactures metal cans that are sold to Division Djand also to external customers. Division D produces soft drinks and sells them to external customers in the cans that it obtains from Division C. Division C annual budget information N$130 Market selling price per 1 000 cans N$0.04 Variable costs per can N$2.4 million Fixed costs 40 million cans Production capacity 38 million cans External demand for cans 20 million cans Demand from Division D Division D annual budget information Selling price per canned soft drink N$0.50 Other variable costs per canned soft drink (excluding the can) N$0.15 Cost of a can (from Division C) At transfer price Fixed costs N$1 750 000 Transfer Pricing Policy: Division C is required to satisfy the demand of Division D before selling cans externally. The transfer price for a can is full cost-plus 20%. REQUIRED: a) Produce the profit statement for each Division showing sales, costs and the overall total profit of CD. (show external sales and inter-divisional transfers separately where appropriate). b) Suppose Division D supplies the external market with 20 million cansland Division's demand has grown to the total production capacity of Division C from the current 20 million cans. DivisionCexternal selling price is N$150 per 1,000 cans Calculate the minimum transfer price to Division D
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