Marriott Chairs has two divisions: Legs and Chairs. The Leg Division sells all of its output to the
| Marriott Chairs has two divisions: Legs and Chairs. The Leg Division | |||||
| sells all of its output to the Chair Division. The only product of the Leg | |||||
| Division is chair legs that the Chair Division uses in making chairs. | |||||
| Each chair is completed by the Chair Division requires 4 legs. Production quantity | |||||
| and cost data for the period follows: | |||||
| Number of chair legs | 48,000 | ||||
| Retail price per leg | $32 | ||||
| Direct materials | $220,000 | ||||
| Direct labor | 160,000 | ||||
| Factory OH | 150,000 | ||||
| 30% | is variable | ||||
| Operating expenses | $218,000 | ||||
| 20% | is variable | ||||
| Required: | |||||
| Determine the transfer price for a chair leg using: | |||||
| 1) | Market price | ||||
| 2) | Variable Product costs plus | 40% | |||
| 3) | Absorption costing plus | 14% | |||
| 4) | Variable costs | ||||
| 5) | Total costs plus | 9% | |||
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