1.
Introduction:
The transfer price refers to the price at which the goods and services are exchanged between companies under common control or between divisions of the same company.
The value of the lowest acceptable transfer price for the selling division, the highest acceptable transfer price for the buying division, the range of acceptable transfer price and will the managers voluntarily agree to transfer the units along with the reasons for the same.
2.
The transfer price refers to the price at which the goods and services are exchanged between companies under common control or between divisions of the same company.
To explain
The effect on the profits of the P Division, C division, and the entire company due to the change in the supply price of the P division.
3.
The transfer price refers to the price at which the goods and services are exchanged between companies under common control or between divisions of the same company.
The value of the lowest acceptable transfer price for the selling division, the highest acceptable transfer price for the buying division, the range of acceptable transfer prices and will the managers voluntarily agree to transfer units within the divisions along with the reason for the same.
4.
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.
The P Division should meet the price of the outside supplier or not.
The effect on the profits of the company as a whole when the P Division does not meet the price of the outside supplier.
5.
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 C Division should purchase from the P Division at a higher price for the good of the company as a whole.
6.
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.
The effect on the profits of the company as a whole when the C Division is required to purchase 5,000 tons of pulp each year from the P Division at $70 per ton.
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Chapter 11 Solutions
MANAGERIAL ACCOUNTING (LL) W/CONNECT >C<
- 10 Question View Policies Current Attempt in Progress It costs Concord Company $26 per unit ($18 variable and $8 fixed) to produce its product, which normally sells for $38 per unit. A foreign wholesaler offers to purchase 6400 units at $21 each. Concord would incur special shipping costs of $2 per unit if the order were accepted. Concord has sufficient unused capacity to produce the 6400 units. If the special order is accepted, what will be the effect on net income? O $6400 decrease O $19200 increase O $115200 increase O $6400 increasearrow_forwardExercise 11-7 (Algo) Transfer Pricing from the Viewpoint of the Entire Company (LO11-3] Division A manufactures electronic circuit boards that can be sold to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: Selling price per circuit board Variable cost per circuit board Number of circuit boards: Produced during the year Sold to outside customers Sold to Division B $ 189 $ 120 20,300 14,500 5,800 Sales to Division B were at the same price as sales to outside customers. The circuit boards purchased by Division B were used in an electronic instrument manufactured by that division (one board per instrument). Division B incurred $300 in additional variable cost per instrument and then sold the instruments for $690 each. Required: 1. Calculate the net operating incomes earned by Division A, Division B, and the company as a whole. 2. Assume Division A's manufacturing capacity is 20,300 circuit boards. Next year, Division B wants…arrow_forward21.4 Transfer Prices The Hazel Division's unit sales price is $100 and its unit variable cost is $60. Hazel has capacity to produce 10,000 units and is currently selling 8,000 units externally. Fixed costs per unit are $32. If the Hazel Division sells 2,000 units to the Wolf Division, what is the opportunity cost per unit to the Hazel Division?arrow_forward
- CH. 4 Question 5 A company is considering outsourcing production of one of its products. The company has received a bid from another company to produce 10,000 units per year for $16 each. The following information: Direct Materials $9 Direct Labor $4 Variable Manfuacturing OH $2 Fixed Manufacturing OH $3 Total Cost per unit $18 1) Compute the difference in cost between making and buying the product 2) Should the company buy the product from the other company or continue to make it themselves?arrow_forwardAIP 6.11 Transfer Price LO 6 UK Pumps is a multi-divisional firm that manufactures and installs chemical piping and pump systems. The Valve Division makes a single standardized valve. Two divisions, the Valve Division and the Installation Division, are currently involved in a transfer-pricing dispute. Last year, half of the Valve Division's output was sold to the Installation Division for £40 and the remaining half was sold to outsiders for £60. The existing transfer price of £40 per pump has been set through a negotiation process between the two divisions and also with the involvement of senior management. The Installation Division has received a bid from an outside valve manufacturer to supply it with an equivalent valve for £35 each. The manager of the Valve Division has argued that if it is forced to meet the external price of £35, it will lose money on internal sales. The operating data for last year for the Valve Division are as follows: Valve Division Operating Statement Last…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
- urgent Question 9.5 The CFO Ltd. manufactures superior motherboards that are used in a variety of computers. The Motherboard Division (M Division) sells its motherboards both internally and externally. It is operating at 80% of its 250,000 unit capacity and internal sales account for approximately 20% of its current sales volume. Internally the motherboards are transferred into the Computer Division (C Division) at a transfer price of $11,250 each. Variable production costs are the same for internal and external sales. The income statement for the M Division is presented below: Sales $2,850,000,000 Variable costs $900,000,000 Contribution Margin $1,950,000,000 Fixed Costs $1,360,000,000 Operating Income $590,000,000 The C Division uses one component in the production of its final product that sells for $75,000/unit. Other variable costs in the C Division are 40% of sales and fixed costs per unit at its current capacity of 40,000 units are $17,250.…arrow_forwardQS 22-19 (Algo) Determining transfer prices with excess capacity LO C1 The Windshield division of Jaguar Company makes windshields for use in its Assembly division. The Windshield division incurs variable costs of $296 per windshield and has capacity to make 590,000 windshields per year. The market price is $520 per windshield. The Windshield division incurs total fixed costs of $3,750,000 per year. If the Windshield division has excess capacity, what is the range of possible transfer prices that could be used on transfers between the Windshield and Assembly divisions? Transfer price per windshield will be at least but not more than Dravarrow_forwardQuestion 15 Companies can set transfer prices to shift profits between the buyer and seller divisions of national companies to lower their overall taxes, duties, and tariffs. True False Question 16 B.B. Chick owns a factory that produces 22,000 eggs per year that are used for the production of their baskets. B.B. Chick has ample capacity to produce these eggs. B.B. Chick was recently approached by an outside supplier (Chick E. Little) that offered to produce the eggs for $12 per egg. B.B. Chick has provided the following information about the costs associated with producing their eggs: Per unit costs Costs at production of 22,000 $7 $3 $1 eggs S154,000 $66,000 $22,000 Direct materials Direct labour Variable manufacturing overhead Allocated common Fixed $2 $44,000 manufacturing overhead Total $13 S286,000 What is the maximum price B.B. Chick would be willing to pay Chick E. Little for the eggs? $222,000 $286,000 $242,000 $264,000arrow_forward
- Chapter 7 Problem Solution 1 Please select the correct answer and solve and explain. "Goodstone Tire Corp sells tires for $90 each. Per unit costs associated with producing and selling the tires are: Direct Materials $35 Direct Labor $10 Factory Overhead $20 The variable portion of the factory overhead is $8 per unit. A foreign company wants to purchase 1,000 tires for $65 each. Assuming Goodstone has excess capacity: 1) The incremental profit from special order will be $12,000 2) The incremental loss from the special order will be $25,000 3) The will be no incremental loss or profit from the special orderarrow_forwardQuestion 45 Assume a division of HP Inc currently makes 50,000 circuit boards per year used in producing diagnostic electronic instruments at the cost of 150 per board, considering of variable costs per unit of $35 and feed costs per unit of $15. Further, assume Sarmina Corporation offers to sell HP the 50.000 circuit boards for $50 each if HP accepts this offer the facilities currently used to make the boards could be rented to one of HP's suppliers for $75,000 per year. In addition, $8 per unit of the fixed overhead applied to the circuit boards would be totally eliminated. Should HP outsource this component from Sanmina Corporation Support your answer with relevant cost calculations. Make-or-Buy) Decision.arrow_forward--/1 Question 15 es View Policies tions Current Attempt in Progress US Support The Heating Division of Kobe International produces a heating element that it sells to its customers for $44 per unit. Its variable cost per unit is $25, and its fixed cost per unit is $12. Top management of Kobe International would like the Heating Division to transfer 14,600 heating units to another division within the company at a price of $30. The Heating Division is operating at full capacity. What is the minimum transfer price that the Heating Division should accept? tral 65 Minimum transfer price $ 8:48 PM 49) 11/18/2019 Chp fo fn ins prt sc f12 4 home delete end pg up 9 num backspace lock 7 8arrow_forward
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