Management of Mountain Berry Industries Has Just Decided to Employ

Essay

Management of Mountain Berry Industries has just decided to employ a set of transfer prices for intracompany transfers between departments. The objective is to include return on assets as part of the performance evaluation of managers of the various cost centers. Data from the Molding Department for the past six months are as follows:
$\begin{array}{|l|l|l|}\hline & & \text { Expected Increases/ } \\{\text { Account }} & \text { Total Costs } & \text { (Decrease) }\\\hline \text { Raw plastic-XYZ } & \$ 190,000 & 10 \% \\\hline \text { Raw plastic-ABC } & 305,000 & (4) \\\hline \text { Direct labor - melting } & 125,000 & 5 \\\hline \text { Direct labor -blencbing } & 138,000 & 5 \\\hline \text { Direct labor - shaping } & 151,000 & 5 \\\hline \text { Variable overhead } & 70,000 & 3 \\\hline \text { Fixed overhead } & 95,000 & (2) \\\hline\end{array}$ During the six-month period, 100,000 units were produced. The same number of units are expected to be completed during the next six-month period. The company's markup percentage is 20 percent.
a. Compute the estimated total costs for the molding department for the next six months.
b. Develop the cost-plus transfer price for this plastic unit. Round answers to nearest two decimal places.