sferred, what is the lowest acceptable transfer price as far as the selling division is pice Varlable cost of producing a unit of product. The market price charged to outside customers, less any costs saved by transferring Internally. nurcha ng division woul have to nay an outside seller to acquire a similar

sferred, what is the lowest acceptable transfer price as far as the selling division is pice Varlable cost of producing a unit of product. The market price charged to outside customers, less any costs saved by transferring Internally. nurcha ng division woul have to nay an outside seller to acquire a similar

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 4CMA: Morrisons Plastics Division, a profit center, sells its products to external customers as well as to...

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Morrisons Plastics Division, a profit center, sells its products to external customers as well as to other internal profit centers. Which one of the following circumstances would justify the Plastics Division selling a product internally to another profit center at a price that is below the market-based transfer price? a. The buying unit has excess capacity. b. The selling unit is operating at full capacity. c. Routine sales commissions and collection costs would be avoided. d. The profit centers managers are evaluated on the basis of unit operating income.
Which of the following is a disadvantage of outsourcing? A. freeing up capacity B. freeing up capital C. transferring production and technology risks D. limiting ability to upsize or downsize production
Management of Great Springs Bottled Water Company has asked you, the controller, to develop a transfer pricing system for the company. The Transportation Department of the company sells all of its product to the Bottling Department of the company. Thus the Transportation Departments sales become the Bottling Departments cost of goods sold. In order to determine an optimal transfer pricing system, management would like you to demonstrate what an income statement would look like under a cost, market, and negotiated transfer pricing structure. These various transfer prices are listed as follows. Prepare an income statement for each of the transfer prices by filling in the missing numbers in the provided income statement based on each transfer price (thus four different income statements) and calculate the operating income/loss percentage. Prepare a brief summary of the results.
If an outside, perfectly competitive market exists for the intermediate product, what should the transfer price be? Why?
Management of Green Peak Tea Company has asked you, the controller, to develop a transfer pricing system for the company. The Brewing Department of the company sells all of its product to the Bottling Department of the company. Thus the Brewing Departments sales become the Bottling Departments cost of goods sold. In order to determine an optimal transfer pricing system, management would like you to demonstrate what an income statement would look like under a cost, market, and negotiated transfer pricing structure. These various transfer prices are listed as follows. Prepare an income statement for each of the transfer prices by filling in the missing numbers in the provided income statement based on each transfer price (thus four different income statements) and calculate the operating income/loss percentage. Prepare a brief summary of the results.
Which is the best description of a dual transfer price? A) The receiving division is charged the market value of the item transferred while the supplying division is credited with the standard variable cost B) The receiving division is credited the market value of the item transferred while the supplying division is charged with the standard variable cost C) The receiving division is charged the standard variable cost transferred while the supplying division is credited with the market value of the item D) The receiving division is credited the standard variable cost transferred while the supplying division is charged with the market value of the item
Which of the following statements is true? An avoidable fixed production cost incurred before the split-off point in a joint process is relevant in a sell or process further decision. It is profitable to continue processing joint products after the split-off point if their total revenues exceed the joint costs. Which of the following statements is true? Consistency demands that a cost that is relevant in one decision be regarded as relevant in other decisions as well. Variable costs are always relevant costs in decisions.
Many organizations use transfer pricing when transferring products between different divisions of the same organisation. Critically discuss the advantages and disadvantages of the method: Negociated transfer price. Note: Define, explain gives examples and advantages and disadvantages
“Under the general guideline for transfer pricing, the minimum transfer price will vary depending on whether the supplying division has unused capacity or not.” Do you agree? Explain.
Which of the following is a disadvantage of outsourcing? Group of answer choices A. freeing up capacity B. freeing up capital C. transferring production and technology risks D. limiting ability to upsize or downsize production
Many organizations use transfer pricing when transferring products between different divisions of the same organisation. Critically discuss the advantages and disadvantages of the method: Cost plus a mark-up transfer prices Note: Define, explain gives examples and advantages and disadvantages
Market-based transfer prices are best for the buying division. the company when the selling division is operating below capacity. the company when the selling division is operating at capacity. the buying division if it is operating at capacity.