COST ACCOUNTING
TRANSFER PRICING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The third Division of SET Company produces high quality products based on a capacity of 100, 000 units per year. Production details per unit are as follows:Direct Materials P 140Direct Labor 60Variable Overhead 6Fixed Overhead 30 Each product can be sold for P 280 each incurring a variable selling expense of P 40 per unit sold. The third Division is currently producing and selling at capacity. What is the minimum selling price that the Division would consider as “ transfer price” to the other divisions on which no variable period costs would be incurred?
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P 206
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P 240
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P 246
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P 280
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Explanation:
Detailed explanation-1: -The three general categories of costs included in manufacturing processes are direct materials, direct labor, and overhead.
Detailed explanation-2: -Manufacturing costs fall into three broad categories of expenses: materials, labor, and overhead. All are direct costs.
Detailed explanation-3: -The average cost refers to the total cost of production divided by the number of units produced. It can also be obtained by summing the average variable costs and the average fixed costs.
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