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

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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:
 Cost Categories  Unit Cost  Direct materials $8.10 Direct labor 7.00 Variable overhead 4.50 Fixed overhead 4.40 Profit markun (30 percent of cost) ?\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:

Phonetic Method

An approach to teaching reading and spelling that emphasizes sound-symbol relationships and the sounding out of words.

Sight Vocabulary

Words that are immediately recognized on the basis of familiarity with their overall shapes, rather than decoded.

Rote Learning

A memorization technique based on repetition, often without an understanding of the reasoning or relationships behind the information.

Decode New Words

The process of interpreting and understanding unfamiliar words by using knowledge of phonics, context clues, and morphemes.

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