Flash E-Card Manufacturing manufactures software parts for the computer software

Question

Flash E-Card Manufacturing manufactures software parts for the computer software systems that produce e-cards The Flssh l l part is currenity manufactured in the Computer Department The Data Department aso es the part and tho plant has excess capacty to produce tho Flash I part The current market price of the Flash part is $700. The managenal accountant reporled the folowing msniufachuning costs and variable expense daa Flash E- Card Manufacturing Manufacturing Costs and Variable Expense Report Flash Component Drect materials Direct labor Varisble manutactuing ovethead Fxed mansfactaning overhead (cument production level) Vanatle seling expenses (only incurred on sales to outside consumers) 136 150 160 $140 185 prce ts S700 nto mrket what istho bwest acceptable n-house price Dals Department shedd recrve io prodao te pat n-huse at re Cnpde. Dromer? O A $450 O B $586 OD $150

Explanation / Answer

Q1 Answer is A. $ 450 Explanation: Variable cost incurred : (150+160+140): 450 Wwhen the selling division is havng excess capacity, The minimum transfer price shall be the cost icnurred in manufacturing the product for other division i.e. variable cost per unit. Q2 Answer is D. 28.8% and accept. Explanation: Operating income: $ 620,000 Net Assets : 2500,000 -350,000 = $2150,000 Return on investment: 620,000 /2150,000 *100 = 28.83% Q3. Answer is D. cannot be determined

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