1.
Identify the transfer price for the given situation. Explain whether Division A and Division T would choose to transfer at that price.
2.
Identify the transfer price for the given situation. Explain whether Division A and Division T would choose to transfer at that price.
3.
Identify the transfer price for the given situation. Explain whether Division A and Division T would choose to transfer at that price.
4.
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)
- If the minimum transfer price of the selling division is less than the maximum transfer price of the buying division, the intermediate product should be transferred internally. Do you agree or disagree? Why?arrow_forwardManagement 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.arrow_forwardManagement 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.arrow_forward
- Spark Ltd has two divisions, assembly and electrical. The assembly division transfers partially completed components to the electrical division at a predetermined transfer price. The assembly division’s standard variable production cost per unit is $550. This division has spare capacity, and it could sell all its components to outside buyers at $680 per unit in a perfectly competitive market. a) Determine a transfer price using the general rule.b) How would the transfer price change if the assembly division had no spare capacity? c) What transfer price would you recommend if there was no outside market for the transferredcomponent and the assembly division had spare capacity? d) Explain how negotiation between the supplying and buying units may be used to set transferprices. How does this relate to the general transfer pricing rule?arrow_forward_____ 1. If Moonton Company instructed Northern Vale Division to supply Iron Hooks to Mooniyan Division, how much is the maximum transfer price that they can consider? (Round off your final answer to 3 decimal places)_____ 2. Continuing from Question No.1, how much is the minimum transfer price that they can consider? (Round off your final answer to 3 decimal places)arrow_forwardSpark Ltd has two divisions, assembly and electrical. The assembly division transfers partially completed components to the electrical division at a predetermined transfer price. The assembly division’s standard variable production cost per unit is $550. This division has spare capacity, and it could sell all its components to outside buyers at $680 per unit in a perfectly competitive market. Required: a) Determine a transfer price using the general rule. b) How would the transfer price change if the assembly division had no spare capacity? c) What transfer price would you recommend if there was no outside market for the transferred component and the assembly division had spare capacity? d) Explain how negotiation between the supplying and buying units may be used to set transfer prices. How does this relate to the general transfer pricing rule? (\ maximum 200 words)arrow_forward
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