An outside supplier has offered to supply yarn to the Sock Division for $4.00 per...
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An outside supplier has offered to supply yarn to the Sock Division for $4.00 per kilogram. Calculate the fair transfer price of the yarn (if any) for the Yarn Division to sell to the Sock Division. Show ALL workings.
There is no outside supplier for the Sock Division to buy yarn from. The Sock Division sells their final product for $30.00 and has other variable costs of $23.00. Calculate the fair transfer price of the yarn (if any) for the Yarn Division to sell to the Sock Division. Show ALL workings.
Transfer Pricing Warm Woollens' Yarn Division produces spun yarn which can either be sold to outside customers or transferred to the Sock Division to be used in making woollen socks. Each month the Sock Division requires 10,000 kilograms of yarn. The following data is available from last month's operations for the Yarn Division: Production capacity Selling price per kilogram to outside customers Variable cost per kilogram when sold to outside customers 40,000 kg $10.00 $6.00 If the Yarn Division sells yarn to the Sock Division, it can save $1.50 in selling and distribution costs. The Yarn Division can sell 35,000 kilograms each month to outside customers
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