1.
a.
Introduction: The transfer price is the price that is charged by one department of the company to another department of the same company for the transfer of goods and services. For example, the price at which the goods are exchanged with a subsidiary and holding company or sisters’ company is referred to as transfer price.
The value of the lowest transfer price acceptable by the A Division.
1.
b.
Introduction: The transfer price is the price that is charged by one department of the company to another department of the same company for the transfer of goods and services. For example, the price at which the goods are exchanged with a subsidiary and holding company or sisters’ company is referred to as transfer price.
The value of the highest transfer price acceptable by the H Division.
1.
c.
Introduction: The transfer price is the price that is charged by one department of the company to another department of the same company for the transfer of goods and services. For example, the price at which the goods are exchanged with the subsidiary and holding company or sister company is referred to as the transfer price.
The range of acceptable transfer prices and to explain will the division managers will voluntarily agree to the transfer or not.
1.
d.
Introduction: The transfer price is the price that is charged by one department of the company to another department of the same company for the transfer of goods and services. For example, the price at which the goods are exchanged with the subsidiary and holding company or sister company is referred to as the transfer price.
Whether the transfer should take place or not.
2.
a.
Introduction: The transfer price is the price that is charged by one department of the company to another department of the same company for the transfer of goods and services. For example, the price at which the goods are exchanged with a subsidiary and holding company or sisters’ company is referred to as transfer price.
The value of the lowest transfer price acceptable by the A Division.
2.
b.
Introduction: The transfer price is the price that is charged by one department of the company to another department of the same company for the transfer of goods and services. For example, the price at which the goods are exchanged with a subsidiary and holding company or sisters’ company is referred to as transfer price.
The value of the highest transfer price acceptable by the H Division.
2.
c.
Introduction: The transfer price is the price that is charged by one department of the company to another department of the same company for the transfer of goods and services. For example, the price at which the goods are exchanged with a subsidiary and holding company or sisters’ company is referred to as transfer price.
The range of acceptable transfer prices and to explain will the division managers voluntarily agree to the transfer or not.
2.
d.
Introduction: The transfer price is the price that is charged by one department of the company to another department of the same company for the transfer of goods and services.
Whether the transfer should take place or not.
3.
a.
Introduction: The transfer price is the price that is charged by one department of the company to another department of the same company for the transfer of goods and services. For example, the price at which the goods are exchanged with the subsidiary and holding company or sister company is referred to as the transfer price.
The value of the lowest transfer price acceptable by the A Division.
3.
b.
Introduction: The transfer price is the price that is charged by one department of the company to another department of the same company for the transfer of goods and services. For example, the price at which the goods are exchanged with the subsidiary and holding company or sister company is referred to as the transfer price.
The value of the highest transfer price acceptable by the H Division.
3.
c.
Introduction: The transfer price is the price that is charged by one department of the company to another department of the same company for the transfer of goods and services. For example, the price at which the goods are exchanged with the subsidiary and holding company or sister company is referred to as the transfer price.
The range of acceptable transfer prices to explain will the division managers will voluntarily agree to the transfer or not.
3.
d.
Introduction: The transfer price is the price that is charged by one department of the company to another department of the same company for the transfer of goods and services. For example, the price at which the goods are exchanged with the subsidiary and holding company or sister company is referred to as the transfer price.
Whether the transfer should take place or not.
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Chapter 11 Solutions
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- 7. Transfer Pricing Domagisko Company's Division 'S' (selling division) produces a small tool used by other companies as a key part in their products. Cost and sales data related to the small tool are given below: Selling price per unit Variable costs per unit P 50 P 30 Fixed costs per unit* P 12 based on capacity of 40,000 tools per year. The company's Division 'B' (buying division) is introducing a new product that will use the same tool such as the one produced by Division S. An outside supplier has quoted the Division B a price of P 48 per tool. Division B would like to purchase the tools from Division S, only if an acceptable transfer price can be worked out. REQUIRED: Consider the following independent cases: 1. Division S has ample idle capacity to handle all the Division B's needs: A) What is the minimum transfer price for Division S? B) What is the maximum transfer price for Division B? 2. Division S is presently selling all the tools it can produce to outside customers: A)…arrow_forwardSandpiper Inc. has a division that manufactures a component that sells for $165 and has a variable cost of $45. Another division of the company wants to purchase the component Fixed cost per unit of the component is $20. What is the minimum transfer price if the division is operating at capacity? OA. $165 OB. $45 OC. $20 OD. $65arrow_forwardJarred Manufacturing has a valve division that manufactures and sells a standard valve.Capacity in Units 100 000 unitsSelling Price to external customers R300Variable Costs per unit R160Fixed Costs (based on capacity) R90 per unitThe company has a Pump division that could use this valve in one of its pumps. The pump division is currently purchasing 10 000 valves per year from a German supplier at a cost of R290 per valve. Required;4.1 Assuming that the Valve Division has ample idle capacity to handle all of the Pump Division needs. What is the acceptable range, if any, for the transfer price between the two divisions? 4.2 Assuming that the Valve Division is selling all of its valves that it can produce to external customers. What is the acceptable range, if any, for the transfer price between the two divisions? 4.3 Assuming that the Valve Division is selling all of its valves that it can produce to external customers and that R30 in variable costs can be avoided on inter-division…arrow_forward
- Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $12. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the market-based transfer price? • Variable cost per unit $10 • Fixed cost per unit 1.16 • Division B sales price of Component X 14.50arrow_forwardCVP Analysis of Multiple Products Alo Company produces commercial printers. One is the regular model, a basic model that is designed to copy and print in black and white. Another model, the deluxe model, is a color printer-scanner-copier. For the coming year, Alo expects to sell 90,000 regular models and 18,000 deluxe models. A segmented income statement for the two products is as follows: Sales Less: Variable costs Contribution margin Less: Direct fixed costs Segment margin Less: Common fixed costs Operating income Required: Regular Model $14,400,000 8,640,000 $5,760,000 1,200,000 $4,560,000 Show Transcribed Text units Deluxe Model units $12,240,000 7,344,000 $4,896,000 960,000 $3,936,000 Total $26,640,000 15,984,000 $10,656,000 2,160,000 $8,496,000 1,628,800 $6,867,200 V 1. Compute the number of regular models and deluxe models that must be sold to break even. Round your answers to the nearest whole unit. Regular models Deluxe models C 2. Using information only from the total column…arrow_forwardCollyer Ltd has a valve division that manufactures and sells a standard valve as follows: Capacity in units Selling price to outside customers on intermediate market Variable costs per unit Fixed costs per unit (based on capacity) 100,000 £30 £16 £9 The company has a pump Division that could use this valve in the manufacture of one of its pumps. The pump Division is currently purchasing 10,000 valves per year from an overseas supplier at a cost of £29 per valve. Required: 1. Assume that the valve Division has ample idle capacity to handle all of the Pump division's needs. What is the acceptable range, if any, for the transfer price between the two division? (5 marks) 2. Assume that the valve Division is selling all that it can produce to outside customers on the intermediate market. What is the acceptable range, if any, for the transfer price between the two divisions? (5 marks) 3. Assume that the valve Division is selling all that it can produce to outside customers on the…arrow_forward
- Current Attempt in Progress The fastener division of Southern Fasteners manufactures zippers and then sells them to customers for $7.80 per unit. Its variable cost is $2.97 per unit, and its fixed cost per unit is $1.55. Management would like the fastener division to transfer 11,200 of these zippers to another division within the company at a price of $2.97. The fastener division could avoid $0.43 per zipper of variable packaging costs by selling internally. Determine the minimum transfer price. (a) Assuming the fastener division is not operating at full capacity. (Round answer to 2 decimal places, e.g. 10.50.) Minimum transfer price $ (b) Assuming the fastener division is operating at full capacity. (Round answer to 2 decimal places, e.g. 10.50.) Minimum transfer price $arrow_forwarda company audio division produces a speaker that is used by manufactureers of various audio products Sales and cost data on the speaker follow Selling price per unit 120 varioable cost per unit 102 Fixed costs per unit $8 Capacity in units 25,000 Assume the dvision is selling 22500 speakers per year tocusotmers a) what is the lowest acceptable transfer price b) what is highest accepatbale transfer price What is the range of acceptable transfer prices between 2 division If left free to negotiate without interference would you expect divison managers to voluntaily agree to transfer 5000 speakers fromthe Audio divison to Hi Fi? why or why not From the standpoint of the entire company should the transfer take place why or why not?arrow_forwardQuestion 3 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. Required: Determine a transfer price using the general rule. How would the transfer price change if the assembly division had no spare capacity? What transfer price would you recommend if there was no outside market for the transferred component and the assembly division had spare capacity? 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?arrow_forward
- Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $12. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost-based transfer price? Variable cost per unit $7.48 • Fixed cost per unit 1.97 • Division B sales price of Component X 14.50arrow_forwardk esc Daily Kneads, Inc., is considering outsourcing one of its many products rather than making it internally. The supplier will charge $20,000 for 20,000 pounds of the product. The costs per pound to make this product include: Direct Labor Direct Materials Allocated Corporate Overhead Calculate the incremental savings (or loss) per pound if the company outsources the product. If the company will lose money per pound by outsourcing, enter your answer with a negative sign "-" (not parentheses). Click Save and Submit to save and submit. Click Save All Answers to save all answers. 1 Q A Z 2 W S Cost per Pound $0.30 $0.40 $0.80 #3 X E $ 4 D. .:: R C 07 dº % 5 F MacBook Pro T 6 V G & Y 7 H B * 00 8 U J N O Save All O O K Marrow_forwardDivision A makes a part with the following characteristics: Production capacity in units Selling price to outside customers Variable cost per unit Total fixed costs $ $ 30,200 units 22 17 $102,900 Division B, another division of the same company, would like to purchase 17,300 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $20 each. Suppose that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into sales to outside customers. If Division A refuses to accept the $20 price internally and Division B continues to buy from the outside supplier, the company as a whole will be:arrow_forward
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