Question 13 (1 point) X Company has two divisions, Fabricating and Assembly. The

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Question 13 (1 point) X Company has two divisions, Fabricating and Assembly. The Fabricating Division transfers partially completed components to the Assembly Division at a predetermined transfer price. The Fabricating Division's standard variable production cost is $200 per unit. It could sell all of its components to outside buyers at $350 per unit in a perfectly competitive market. Using the general rule, determine a transfer price for the component assuming the Fabricating Division has excess capacity. ab Do not enter any dollar signs or decimals. For example enter $800.00 as 800 Save Question 14 (1 point) X Company has two divisions, Fabricating and Assembly. The Fabricating Division transfers partially completed components to the Assembly Division at a predetermined transfer price. The Fabricating Division's standard variable production cost is $200 per unit. Its full cost (variable cost plus allocated fixed overhead) to produce the component is $390 per unit. The company uses cost- based transfer prices, determine the transfer price for the component assuming the Fabricating Division has excess capacity and uses the variable cost as a transfer price. example enter $800.00 as 800 Do not enter any dollar signs or decimals. For Save

Explanation / Answer

13. As there is excess capacity, fabrication division can transfer as minimum price i.e. 200

14. The question explicitlystates variable cost is transfer price thus 200

15. The question explicitly states total cost is transfer price i.e. 390 (variable+fixed)

16. Under this approach company transfer price would be 300 is correct statement because divisions of the organisation are cost centers.

2.

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