Help 48 Sun 80 v2cengagenowcom CengageNowy2 1 Online teachin

Help 48% -Sun 8:0 v2.cengagenow.com CengageNowy2 1 Online teaching and- Problem 12-12 Paige Inc. has a division that makes paint and another division that constructs subdivisions. The paint division incurs the following costs for one gallon of paint: Direct materials Direct labor Variable overhead Fixed overhead Total $1.10 1.45 0.90 1.15 $4.60 The Paint Division can make 1,000,000 gallons per year, and expects to produce 800,000 gallons next year. The Construction Division currently buys 200,000 gallons of paint from an outside supplier for $5.30 per gallon (the same price that the Paint Division receives). If required, round your answers to the nearest cent. A. The maximum transfer price per gallon of paint 1s B. The minimum transfer price per gallon of paint is c. Assume that the transfer takes place at $5 per gaion; calculate the amount by which each of the following will be better off with the transfer than without it. Paint Division Construction Division Paige Inc. as a whole Previous Next

Solution

A The maximum transfer price per gallon of paint is $5.30 (Market Price)

B The minimum transfer price per gallon of paint is $ 3.45 (1.10+1.45+.90) (Variable Cost per Gallon)

C

Paint Division (5-3.45)*200000	310000
Construction Division =(5.30-5)*200000	60000
Paige Inc= (5.30-3.45)*200000	370000