Daytona,Inc.has a division that makes paint and another division that constructs subdivision houses.The paint division incurs the following costs for one litre of paint: $$\begin{array} { l r }
\text { Direct materials } & \$ 2,101.10 \
\text { Direct labour } & 1,451.45 \
\text { Variable overhead } & 1,900.90 \
\text { Fixed overhead } & 2,151.15 \
\text { Total } & \$ 7,604,60
\end{array}$$ The Paint Division can make 1,000,000 L per year and is at capacity.The Construction Division currently buys its paint from an outside supplier for $8.20 per litre (the same price that the Paint Division receives). A. The maximum transfer price per litre of paint is $\$\_\_\_\_$ This price is set by which of the two divisions?
B. The minimum transfer price per litre of $p$ aint is $\$\_\_\_\_$ This price is set by which of the two divisions?

Question

Daytona,Inc.has a division that makes paint and another division that constructs subdivision houses.The paint division incurs the following costs for one litre of paint: $$\begin{array} { l r } 
\text { Direct materials } & \$ 2,101.10 \
\text { Direct labour } & 1,451.45 \
\text { Variable overhead } & 1,900.90 \
\text { Fixed overhead } & 2,151.15 \
\text { Total } & \$ 7,604,60
\end{array}$$ The Paint Division can make 1,000,000 L per year and is at capacity.The Construction Division currently buys its paint from an outside supplier for $8.20 per litre (the same price that the Paint Division receives). A. The maximum transfer price per litre of paint is $\$\_\_\_\_$ This price is set by which of the two divisions?
B. The minimum transfer price per litre of $p$ aint is $\$\_\_\_\_$ This price is set by which of the two divisions?

Quizplus · Accepted Answer

The Answer of Daytona,Inc.has a division that makes paint and another division that constructs subdivision houses.The paint division incurs the following costs for one litre of paint: $$\begin{array} { l r } 
\text { Direct materials } & \$ 2,101.10 \
\text { Direct labour } & 1,451.45 \
\text { Variable overhead } & 1,900.90 \
\text { Fixed overhead } & 2,151.15 \
\text { Total } & \$ 7,604,60
\end{array}$$ The Paint Division can make 1,000,000 L per year and is at capacity.The Construction Division currently buys its paint from an outside supplier for $8.20 per litre (the same price that the Paint Division receives). A. The maximum transfer price per litre of paint is $\$\_\_\_\_$ This price is set by which of the two divisions?
B. The minimum transfer price per litre of $p$ aint is $\$\_\_\_\_$ This price is set by which of the two divisions?

Daytona,Inc The Paint Division Can Make 1,000,000 L Per Year and Constructs