accounting- Weather master Window Company manufactures windows
by ella | Aug 20, 2025 | Business
|
Weathermaster Window Company
manufactures windows for the home-building industry. The window frames are
produced in the Frame Division. The frames are then transferred to the Glass
Division, where the glass and hardware are installed. The company’s
best-selling product is a three-by-four-foot, doublepaned operable window.
|
|
The
Frame Division can also sell frames directly to custom home builders, who
install the glass and hardware. The sales price for a frame is $220. The
Glass Division sells its finished windows for $440. The markets for both
frames and finished windows exhibit perfect competition.
|
|
The
standard cost of the window is detailed as follows:
|
|
|
Frame
Division
|
|
Glass
Division
|
|
Direct material
|
$
|
36
|
|
|
$
|
66
|
*
|
|
Direct labor
|
|
48
|
|
|
|
36
|
|
|
Variable overhead
|
|
66
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
150
|
|
|
$
|
168
|
|
|
|
|
|
|
|
|
|
|
|
|
*Not including the transfer price
for the frame.
|
1.
value:
2.00 points
Required information
Problem 13-47 Part 1
|
1-a.
|
Assume that there is no excess
capacity in the Frame Division. Use the general rule to compute the
transfer price for window frames.
|
|
|
|
|
1-b.
|
Calculate the transfer price if it
is based on standard variable cost with a 10 percent markup.
|
|
|
|
2.
Required information
Problem 13-47 Part 2
|
2-a.
|
Assume that there is excess capacity
in the Frame Division. Use the general rule to compute the transfer price
for window frames.
|
|
|
|
|
2-c.
|
Suppose the predetermined
fixed-overhead rate in the Frame Division is 125 percent of direct-labor
cost. Calculate the transfer price if it is based on standard full cost plus
a 10 percent markup.
|
|
|
|
|
2-d.
|
The Glass Division has been
approached by the U.S. Army with a special order for 1,600 windows at $388.
Assume the transfer price established in requirement 2-c. above is being
used.
|
|
|
|
|
(i)
|
What is the incremental contribution
(loss) per window for Weathermaster Window Company as a whole if this special
order is accepted?
|
|
|
|
|
(ii)
|
From the perspective of
Weathermaster Window Company as a whole, should the special order be accepted
or rejected?
|
|
|
|
|
|
|
|
|
|
|
2-e.
|
The Glass Division has been
approached by the U.S. Army with a special order for 1,600 windows at $388.
Assume the transfer price established in requirement 2-c. above is being
used.
|
|
|
|
|
(i)
|
What is the incremental contribution
(loss) per window for the Glass Division if this special order is accepted?
|
|
|
|
|
(ii)
|
Will an autonomous Glass Division
manager accept or reject the special order?
|
|
|
|
|
|
|
