Plank,Inc.has a division that makes paint and another division that constructs subdivisions.The paint division incurs the following costs for one litre of paint: $\begin{array}{lr}
\text { Direct materials } & \$ 1.10 \
\text { Direct labour } & 1.45 \
\text { Variable overhead } & 0.90 \
\text { Fined overhead } & 1.15 \
\text { Total } & \$ 4.60
\end{array}$ The Paint Division can make 1,000,000 L per year,and expects to produce 1,000,000 L next year.The Construction Division currently buys 200,000 L of paint from an outside supplier for $5.20 per litre (the same price that the Paint Division receives). A. The maximum transfer price per litre of paint is $\$\_\_\_\_\_$.
B. The minimum transfer price per litre of $p$ aint is $\$\_\_\_\_\_$
C. Does it matter whether or not the two divisions transfer?

Question

Plank,Inc.has a division that makes paint and another division that constructs subdivisions.The paint division incurs the following costs for one litre of paint: $\begin{array}{lr}
\text { Direct materials } & \$ 1.10 \
\text { Direct labour } & 1.45 \
\text { Variable overhead } & 0.90 \
\text { Fined overhead } & 1.15 \
\text { Total } & \$ 4.60
\end{array}$ The Paint Division can make 1,000,000 L per year,and expects to produce 1,000,000 L next year.The Construction Division currently buys 200,000 L of paint from an outside supplier for $5.20 per litre (the same price that the Paint Division receives). A. The maximum transfer price per litre of paint is $\$\_\_\_\_\_$.
B. The minimum transfer price per litre of $p$ aint is $\$\_\_\_\_\_$ 
C. Does it matter whether or not the two divisions transfer?

Quizplus · Accepted Answer

The Answer of Plank,Inc.has a division that makes paint and another division that constructs subdivisions.The paint division incurs the following costs for one litre of paint: $\begin{array}{lr}
\text { Direct materials } & \$ 1.10 \
\text { Direct labour } & 1.45 \
\text { Variable overhead } & 0.90 \
\text { Fined overhead } & 1.15 \
\text { Total } & \$ 4.60
\end{array}$ The Paint Division can make 1,000,000 L per year,and expects to produce 1,000,000 L next year.The Construction Division currently buys 200,000 L of paint from an outside supplier for $5.20 per litre (the same price that the Paint Division receives). A. The maximum transfer price per litre of paint is $\$\_\_\_\_\_$.
B. The minimum transfer price per litre of $p$ aint is $\$\_\_\_\_\_$ 
C. Does it matter whether or not the two divisions transfer?

Plank,IncHas a Division That Makes Paint and Another Division That