Todd Inc. is in the process of developing a transfer price for a part produced by Dept. A and used by other departments in manufacturing various products. Unit costs for the part are as follows:
- Cost Categories:
- Direct Materials=$8.10
- Direct Labor=7.00
- Variable OH=4.50
- Fixed OH=4.40
- Profit Markup(30 percent of cost)=?
Dept. B can purchase the part from an outside supplier at $29.50 per unit.
a) Develop the cost-plus transfer price for the part.
b) What should be the transfer price? Support your answer.