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AccountingManagerial Accounting: The Cornerstone of Business Decision-Making7th Edition

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Chapter 11, Problem 22BEB
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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

Solutions

Chapter
Section
Problem 1DQ
Problem 2DQ
Problem 3DQ
Problem 4DQ
Problem 5DQ
Problem 6DQ
Problem 7DQ
Problem 8DQ
Problem 9DQ
Problem 10DQ
Problem 11DQ
Problem 1MCQ
Problem 2MCQ
Problem 3MCQ
Problem 4MCQ
Problem 5MCQ
Problem 6MCQ
Problem 7MCQ
Problem 8MCQ
Problem 9MCQ
Problem 10MCQ
Problem 11MCQ
Problem 12MCQ
Problem 13BEA
Problem 14BEA
Problem 15BEA
Problem 16BEA
Problem 17BEA
Problem 18BEA
Problem 19BEB
Problem 20BEB
Problem 21BEB
Problem 22BEB
Problem 23BEB
Problem 24BEB
Problem 25E
Problem 26E
Problem 27E
Problem 28E
Problem 29E
Problem 30E
Problem 31E
Problem 32E
Problem 33E
Problem 34E
Problem 35E
Problem 36E
Problem 37E
Problem 38E
Problem 39E
Problem 40P
Problem 41P
Problem 42P
Problem 43P
Problem 44P
Problem 45P
Problem 46P
Problem 47P
Problem 48P
Problem 49P
Problem 50C
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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Calculating Transfer Price

Teslum Inc. has a number of divisions, including the Machina Division, a producer of high-end espresso makers, and the Java Division, a chain of coffee shops.

Machina Division produces the EXP-100 model espresso maker that can be used by Java Division to create various coffee drinks. The market price of the EXP-100 model is $950, and the full cost of the EXP-100 model is $475.

Required:

  1. 1. If Teslum has a transfer pricing policy that requires transfer at full cost, what will the transfer price be? Do you suppose that Machina and Java divisions will choose to transfer at that price?
  2. 2. If Teslum has a transfer pricing policy that requires transfer at market price, what would the transfer price be? Do you suppose that Machina and Java divisions would choose to transfer at that price?
  3. 3. Now suppose that Teslum allows negotiated transfer pricing and that Machina Division can avoid $135 of selling expense by selling to Java Division. 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 Machina and Java divisions would choose to transfer somewhere in the bargaining range?

1.

To determine

Calculate the transfer price. Also, describe whether division M and division J should transfer at that price.

Explanation

Transfer Price:

The amount of price charged by the selling department for a component to the purchasing department of a similar company is known as transfer price.

The transfer price of EXP-100 model will be the full cost of the model that is $475. Since the market price of the model is $950; division J will accept the model at $475...

2.

To determine

Calculate the transfer price if the transfer pricing policy requires the transfer at $950.

3.

To determine

Describe the division which will set the minimum transfer price and the division which will set the maximum transfer price.

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Ch-11 P-1DQCh-11 P-2DQCh-11 P-3DQCh-11 P-4DQCh-11 P-5DQCh-11 P-6DQCh-11 P-7DQCh-11 P-8DQCh-11 P-9DQCh-11 P-10DQ
Ch-11 P-11DQCh-11 P-1MCQCh-11 P-2MCQCh-11 P-3MCQCh-11 P-4MCQCh-11 P-5MCQCh-11 P-6MCQCh-11 P-7MCQCh-11 P-8MCQCh-11 P-9MCQCh-11 P-10MCQCh-11 P-11MCQCh-11 P-12MCQCh-11 P-13BEACh-11 P-14BEACh-11 P-15BEACh-11 P-16BEACh-11 P-17BEACh-11 P-18BEACh-11 P-19BEBCh-11 P-20BEBCh-11 P-21BEBCh-11 P-22BEBCh-11 P-23BEBCh-11 P-24BEBCh-11 P-25ECh-11 P-26ECh-11 P-27ECh-11 P-28ECh-11 P-29ECh-11 P-30ECh-11 P-31ECh-11 P-32ECh-11 P-33ECh-11 P-34ECh-11 P-35ECh-11 P-36ECh-11 P-37ECh-11 P-38ECh-11 P-39ECh-11 P-40PCh-11 P-41PCh-11 P-42PCh-11 P-43PCh-11 P-44PCh-11 P-45PCh-11 P-46PCh-11 P-47PCh-11 P-48PCh-11 P-49PCh-11 P-50C

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