Wheely, inc., has two divisions, A and that manufacture expensive bicycles. Division A produces the. 1 answer below »

Wheely, inc., has two divisions, A and that manufacture expensive bicycles. Division A produces the bicycle frame, and division B assembles the rest of the bicycle onto the frame. There is a market for both the subassembly and the final product_ Each division has been designated as a profit center. The transfer price for the subassembly has been set at the long-run average market price. The following data are available for each division: Selling price for final product………………………………………………………….$360 Long-run average selling price for intermediate product……………………………….275 Incremental cost per unit for completion in division B………………………………….120 Incremental cost per unit in division A…………………………………………………..90 The manager of division B has made the following calculation: Selling price for final product…………………………………………………………$360 Transferred-in cost per unit (market)…………………………………$275 Incremental cost per unit for completion………………………………120…………..395 Contribution (loss) on product……………………………………………………….$(35) 1. Should transfers be made to division B if there is no unused capacity in division A? Is the market price the correct transfer price? Show your computations. 2. Assume that division As ma

 

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