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Refer to Cornerstone Exercise 10.4. Required: 1. If Carreker, Inc., has a transfer pricing policy that requires transfer at full product cost, what would the transfer price be? Do you suppose that Alamosa and Tavaris divisions would choose to transfer at that price? 2. If Carreker, Inc., has a transfer pricing policy that requires transfer at full cost plus 25 percent, what would the transfer price be? Do you suppose that Alamosa and Tavaris divisions would choose to transfer at that price? 3. If Carreker, Inc., has a transfer pricing policy that requires transfer at variable product cost plus a fixed fee of $2.00 per unit, what would the transfer price be? Do you suppose that Alamosa and Tavaris divisions would choose to transfer at that price? 4. What if Alamosa Division plans to produce and sell only 65,000 units of the 2.6 cm blade next year? The Carreker, Inc., policy is that all transfers be at full cost. Which division sets the minimum transfer price, and what is it? Which division sets the maximum transfer price, and what is it? Do you suppose that Alamosa and Tavaris divisions would choose to transfer?

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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

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Chapter
Section
BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 10, Problem 5CE
Textbook Problem
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Refer to Cornerstone Exercise 10.4.

Required:

  1. 1. If Carreker, Inc., has a transfer pricing policy that requires transfer at full product cost, what would the transfer price be? Do you suppose that Alamosa and Tavaris divisions would choose to transfer at that price?
  2. 2. If Carreker, Inc., has a transfer pricing policy that requires transfer at full cost plus 25 percent, what would the transfer price be? Do you suppose that Alamosa and Tavaris divisions would choose to transfer at that price?
  3. 3. If Carreker, Inc., has a transfer pricing policy that requires transfer at variable product cost plus a fixed fee of $2.00 per unit, what would the transfer price be? Do you suppose that Alamosa and Tavaris divisions would choose to transfer at that price?
  4. 4. What if Alamosa Division plans to produce and sell only 65,000 units of the 2.6 cm blade next year? The Carreker, Inc., policy is that all transfers be at full cost. Which division sets the minimum transfer price, and what is it? Which division sets the maximum transfer price, and what is it? Do you suppose that Alamosa and Tavaris divisions would choose to transfer?

1.

To determine

Identify the transfer price for the given situation. Explain whether Division A and Division T would choose to transfer at that price.

Explanation of Solution

Transfer price: It is a price charged on the goods manufactured by the one division and transferred to another division.

The full cost transfer price is $15.20($9

2.

To determine

Identify the transfer price for the given situation. Explain whether Division A and Division T would choose to transfer at that price.

3.

To determine

Identify the transfer price for the given situation. Explain whether Division A and Division T would choose to transfer at that price.

4.

To determine

In the given situation, identify the division that sets the minimum transfer price, and the price amount. Identify the division that sets the maximum transfer price, and the price amount. Explain whether Division A and Division T would choose to transfer.

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Chapter 10 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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