[财务管理]Fundamental_Accounting_Principles_Chap021.pptVIP

Assume that the LCD division has excess capacity. For example, the LCD division might currently be producing only 80,000 units. Consequently, with excess capacity, LCD should accept any transfer price of $40 per unit or greater and S-Phone should purchase monitors from LCD. For example, if a transfer price of $50 per monitor is used, the S-Phone manager is pleased to buy from LCD, since that price is below the market price of $80. For each monitor transferred from LCD to S-Phone at $50, the LCD division receives a contribution margin of $10 (computed as $50 transfer price less $40 variable cost) to contribute towards its fixed costs and increase ZTel’s overall profits. This form of transfer pricing is called cost-based transfer pricing. Under this approach, the transfer price might be based on variable costs, total costs, or variable costs plus a markup. Joint costs are costs incurred to produce or purchase two or more products at the same time. For example, a sawmill company incurs a joint cost when it buys logs that it cuts into lumber. The joint cost includes the logs (raw material) and its cutting (conversion) into boards classified as Clear, Select, No. 1 Common, No. 2 Common, No. 3 Common, and other types of lumber and by-products. Financial statements prepared according to GAAP must assign joint costs to products. To do this, management must decide how to allocate joint costs across products benefiting from these costs. If some products are sold and others remain in inventory, allocating joint costs involves assigning costs to both cost of goods sold and ending inventory. The two usual methods to allocate joint costs are: (1) the physical basis and (2) the value basis. The physical basis allocation of joint costs typically involves allocating joint cost using physical characteristics such as the ratio of pounds, cubic feet, or gallons of each joint product to the total pounds, cubic feet, or gallons of all joint products flowing from the cost. Consider