CengageNOWv2, 1 term Printed Access Card for Hansen/Mowen’s Cornerstones of Cost Management, 4th
4th Edition
ISBN: 9781305970762
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Chapter 10, Problem 5CE
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.
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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Calculating Transfer Price
Burt Inc. has a number of divisions, including the Indian Division, a producer of liquid pumps, and Maple Division, a manufacturer of boat engines.
Indian Division produces the h20-model pump that can be used by Maple Division in the production of motors that regulate the raising and lowering of the boat engir
stern drive unit. The market price of the h20-model is $724, and the full cost of the h20-model is $540.
Required:
1. If Burt has a transfer pricing policy that requires transfer at full cost:
What will the transfer price be?
$
Do you suppose that Indian and Maple divisions will choose to transfer at that price?
Maple Division
Indian Division
2. If Burt has a transfer pricing policy that requires transfer at market price:
What would the transfer price be?
$
Do you suppose that Indian and Maple divisions would choose to transfer at that price?
Maple Division
Indian Division
3. Now suppose that Burt allows negotiated transfer pricing and that Indian…
Compute the following :-
1. Calculate the lowest acceptable transfer price for the seller (Division A)?
2. Calculate the highest acceptable transfer price for the buyer (Division B)?
3. Calculate the range of acceptable transfer prices between the two divisions?
4. Assume Division A offers to sell 15,000 units to Division B for $74 and that Division B refuses this price. What will be the loss in potential prodits for the company whole as a whole
1. “Transfer pricing is confined to profit centres”. Do you agree? Why?
2. Give three general methods for determining transfer prices.
3. What properties should transfer-pricing systems have?
4. “All transfer-pricing methods give the same division operating income.” Do you agree? Explain.
5. Under what conditions is a market-based transfer price optimal?
6. What is one potential limitation of full cost-based transfer pricing?
Chapter 10 Solutions
CengageNOWv2, 1 term Printed Access Card for Hansen/Mowen’s Cornerstones of Cost Management, 4th
Ch. 10 - Prob. 1DQCh. 10 - Explain why firms choose to decentralize.Ch. 10 - Explain how access to local information can...Ch. 10 - What are margin and turnover? Explain how these...Ch. 10 - What are the three benefits of ROI? Explain how...Ch. 10 - What are two disadvantages of ROI? Explain how...Ch. 10 - What is residual income? Explain how residual...Ch. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - What is a transfer price?
Ch. 10 - Prob. 11DQCh. 10 - If the minimum transfer price of the selling...Ch. 10 - If an outside, perfectly competitive market exists...Ch. 10 - Prob. 14DQCh. 10 - Prob. 15DQCh. 10 - Forchen, Inc., provided the following information...Ch. 10 - Refer to Cornerstone Exercise 10.1. Forchen, Inc.,...Ch. 10 - Ignacio, Inc., had after-tax operating income last...Ch. 10 - Prob. 4CECh. 10 - Prob. 5CECh. 10 - Prob. 6CECh. 10 - Jarriot, Inc., presented two years of data for its...Ch. 10 - Refer to Exercise 10.7 for data. At the end of...Ch. 10 - Refer to the data given in Exercise 10.8....Ch. 10 - Brewster Company manufactures elderberry wine....Ch. 10 - Xenold, Inc., manufactures and sells cooktops and...Ch. 10 - Prob. 12ECh. 10 - Jocassee Furniture Manufacturing, Inc., has a...Ch. 10 - Prob. 14ECh. 10 - Mossfort, Inc., has a division in Canada that...Ch. 10 - A multinational corporation has a number of...Ch. 10 - Consider the data for each of the following four...Ch. 10 - The following selected data pertain to the Argent...Ch. 10 - Prob. 19ECh. 10 - The key difference between residual income and EVA...Ch. 10 - If sales and average operating assets for Year 2...Ch. 10 - Prob. 22ECh. 10 - Refer to 10.22. If the imputed interest rate is...Ch. 10 - A company had WACC (weighted average cost of...Ch. 10 - Prob. 25PCh. 10 - Raddington Industries produces tool and die...Ch. 10 - Prob. 27PCh. 10 - Prob. 28PCh. 10 - Oriole, Inc., owns a number of food service...Ch. 10 - Prob. 30PCh. 10 - Prob. 31PCh. 10 - Renslen, Inc., a truck manufacturing conglomerate,...Ch. 10 - Jump Start Company (JSC), a subsidiary of Mason...Ch. 10 - Prob. 34PCh. 10 - Grate Care Company specializes in producing...
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