50. (8 points) Washo manufactures washing machines and has two divisions: Fabrication and Assembly. The...
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50. (8 points) Washo manufactures washing machines and has two divisions: Fabrication and Assembly. The Fabrication Division manufactures the machine components. The Assembly Division assembles the components into completed washing machines. After Assembly the machines are sold externally to retail stores for a price of $800 per machine. The Fabrication Division transfers all machine components internally to Assembly. If Fabrication were to sell components externally, the price is $400. Fabrication Assembly Division Division $100 $ 140 Direct materials Direct labor $ 80 $60 Variable overhead $70 $40 Division fixed costs $ 50 $ 120 a. Using a transfer price based on total manufacturing costs prepare Operating Income Statements for each Division: Fabrication and Assembly. b. Using an external market-based transfer price prepare Operating Income Statements for each Division: Fabrication and Assembly. c. If you are the manager of the Fabrication division, which transfer price method do you prefer? Why do you prefer this method
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