Medlock Company has two divisions, Wheel and Chassis. The Wheel Dvision manufact
ID: 2468001 • Letter: M
Question
Medlock Company has two divisions, Wheel and Chassis. The Wheel Dvision manufactures a wheel assembly that the Chassis Division uses. The variable cost to produce this assembly is $3.70 per unit; full cost is $4.70. The component sells on the open market for $8.60.
What will the transfer price be if Medlock uses a pricing rule of variable cost plus 34 percent? (Round your answer to 2 decimal places.)
What will the transfer price be if Medlock uses a pricing rule of variable cost plus 34 percent? (Round your answer to 2 decimal places.)
Explanation / Answer
The Variable Cost per Unit = $ 3.700 per unit
Profit percent at 34% = $ 1.258 per unit
Therefore, Transfer Price = $ 4. 958 per unit.