Problem 10-34
Problem 10-34
Carnover, Inc., manufactures a broad line of industrial and consumer products. One of its plants is located in
Madrid, Spain, and another in Singapore. The Madrid plant is operating at 85 percent capacity. Its main
product, electric motors, has experienced softness in the market, which has led to predictions of further
softening of the market and predictions of a decline in production to 65 percent capacity. If that happens,
workers will have to be laid off and one wing of the factory closed. The Singapore plant manufactures
heavy-duty industrial mixers that use the motors manufactured by the Madrid plant as an integral
component. Demand for the mixers is strong. Price and cost information for the mixers are as follows:
Fixed overhead is based on an annual budgeted amount of $3,500,000 and budgeted production of 35,000
mixers. The direct materials cost includes the cost of the motor at $200 (market price).
The Madrid plant capacity is 20,000 motors per year. Cost data are as follows:
1. What is the maximum transfer price the Singapore plant would accept?
$200, karena dengan harga tersebut sesuai dengan harga 1 unit motor di pasaran
2. What is the minimum transfer price the Madrid plant would accept?
$135, hal ini sesuai dengan nilai dari variable cost yang dimiliki Madrid Plant dengan asumsi jumlah
pegawai tetap
Direct Material 75
Direct Labor 60
Total variable cost 135