The Leg Division of Creative Chair Company Sells All of Its

Essay

The Leg Division of Creative Chair Company sells all of its output to the Chair Division of the company. The only product of the Leg Division is chair legs that the Chair Division uses in making chairs. The retail price of the legs is $12 per leg. Each chair completed by the Chair Division requires 4 legs. Production quantity and cost data for the period are as follows:
Required:
Determine the transfer price for a chair leg using:
a. Market price
b. Variable product costs plus 40 percent
c. Absorption costs plus 14 percent
d. Variable costs
e. Total costs plus 9 percent