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9 April, 21:14

The Propeller Division provides propellers for the Plane Division of a company. The standard unit costs for the Propeller Division are as follows: Direct materials $ 890 Direct labor 1,590 Variable overhead 575 Fixed overhead 385 Market price per unit 4,395 The propeller department has excess capacity. What is the best transfer price to avoid transfer price problems?

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  1. 9 April, 21:30
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    Transfer price = $3055

    Explanation:

    given data

    Direct materials = $890

    Direct labor = 1,590

    Variable overhead = 575

    Fixed overhead = 385

    Market price per unit = 4,395

    to find out

    best transfer price to avoid transfer price

    solution

    we know that When transfer or division is excess the capacity

    then transfer price will equal to variable cost

    so

    Transfer price = Direct material + Direct labor + Variable overhead ... 1

    put here value we get

    Transfer price = 890 + 1590 + 575

    Transfer price = $3055
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