Richardson,Inc Department B Can Purchase the Housing from an Outside Supplier

question 18

Essay

Richardson,Inc.,is in the process of developing a transfer price for the first section of what will eventually be an automatic lawn-cutting device.The housing is made in Department A and is used by Department B in the final assembly operation.Unit costs for the housing are as follows:
$\begin{array}{lr}\text { Cost Categories }&\text { Unit Cost }\\\text { Direct materials } & \$ 8.10 \\\text { Direct labor } & 7.00 \\\text { Variable overhead } & 4.50 \\\text { Fixed overhead } & 4.40 \\\text { Profit markun (30 percent of cost) } & ?\end{array}$
Department B can purchase the housing from an outside supplier at $29.50 per unit.
a. Develop the cost-plus transfer price for the housing.
b. What should the transfer price be? Support your answer.

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Definitions:

Threatening

Expressing or implying a menace or danger, often intended to intimidate or coerce someone into action or inaction.

Rosabeth Moss Kanter

A professor of business at Harvard Business School known for her research on strategy, innovation, and leadership for change.

Symbols of Power

Objects, actions, or titles that represent authority, influence, and command within a given context, signaling status and control.

Coercing

The act of compelling or influencing someone to do something by using force or threats.