Rapid Industries has multiple divisions. One division, Iron Products, makes a component that another division, Austin, is currently purchasing on the open market. Iron Products currently has a capacity to produce 505,000 components at a variable cost of $5.50 and a full cost of $9.00. Iron Products has outside sales of 460,000 components at a price of $13.50 per unit. Austin currently purchases 55,000 units from an outside supplier at a price of $11.50 per unit. Assume that Austin desires to use a single supplier for it component. a. What will be the effect on Rapid Industries operating profit if the transfer is made internally? Assume the 55,000 units Austin needs are either purchased 100% internally or 100% externally b. What is the minimum transfer price? (Round your answer to 2 decimal places.) Minimum Transfer Price c. What is the maximum transfer price? (Round your answer to 2 decimal places.) Maximum Transfer Price 47

Rapid Industries has multiple divisions. One division, Iron Products, makes a component that another division, Austin, is currently purchasing on the open market. Iron Products currently has a capacity to produce 505,000 components at a variable cost of $5.50 and a full cost of $9.00. Iron Products has outside sales of 460,000 components at a price of $13.50 per unit. Austin currently purchases 55,000 units from an outside supplier at a price of $11.50 per unit. Assume that Austin desires to use a single supplier for it component. a. What will be the effect on Rapid Industries operating profit if the transfer is made internally? Assume the 55,000 units Austin needs are either purchased 100% internally or 100% externally b. What is the minimum transfer price? (Round your answer to 2 decimal places.) Minimum Transfer Price c. What is the maximum transfer price? (Round your answer to 2 decimal places.) Maximum Transfer Price 47

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter11: Performance Evaluation And Decentralization

Section: Chapter Questions

Problem 16BEA

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