1.
Transfer price: Transfer price is the price at which goods and services are transferred between divisions or centers in an organization. The price charged for the transfer of goods and services is recorded as an expense in the buying division and revenue in the selling division.
:
Whether the division accepts or rejects the $340 price.
2.
Transfer price: Transfer price is the price at which goods and services are transferred between divisions or centers in an organization. The price charged for the transfer of goods and services is recorded as an expense in the buying division and revenue in the selling division.
:
The financial advantage or disadvantage if division Q rejects the $340 price.
3.
Transfer price: Transfer price is the price at which goods and services are transferred between divisions or centers in an organization. The price charged for the transfer of goods and services is recorded as an expense in the buying division and revenue in the selling division.
:
The financial advantage or disadvantage if division Q accepts the $340 price.
4.
Transfer price: Transfer price is the price at which goods and services are transferred between divisions or centers in an organization. The price charged for the transfer of goods and services is recorded as an expense in the buying division and revenue in the selling division.
:
The impact of using market price as a transfer price in intra-company transactions.
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MANAGERIAL ACCOUNTING
- Kimmel, Accounting, 7e Help | System Announcements CALCULATOR PRINTER VERSION 1 BACK NEXT Exercise 21-16 Crede Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $11 from an outside vendor. Division A needs 9,300 lamps for the coming year. Division B has the capacity to manufacture 46,700 lamps annually. Sales to outside customers are estimated at 37,400 lamps for the next year. Reading lamps are sold at $11 each. Variable costs are $7 per lamp and include $1 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $72,300. Consider the following independent situations. What should be the minimum transfer price accepted by Division B for the 9,300 lamps and the maximum transfer price paid by Division A? Minimum transfer price accepted by…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_forward10 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_forward
- Exercise 7 (Transfer Pricing from Viewpoint of the Entire Company) Division E manufactures picture tubes for TVs. The tubes can be sold either to Division F of the same company or to outside customers. Last year, the following activity was recorded in Division E: Selling price per tube.. Production cost per tube... P175 P130 Number of tubes: Produced during the year 20,000 16,000 4,000 Sold to outside customers Sold to Division F. Sales to Division F were at the same price as sales to outside customers. The tubes purchased by Division F were used in a TV set manufactured by that division. Division F incurred P300 in additional cost per TV and then sold the TVs for P600 each. Required: 1. Prepare income statements for last year for Division E, Division F, and the company as a whole. 2. Assume that Division E's manufacturing capacity is 20,000 tubes per year. Next year, Division F wants to purchase 5,000 tubes from Division E, rather than only 4,000 tubes as in last year. (Tubes of this…arrow_forwardPROBLEM 11A-4 Transfer Price with an Outside Market [LO11-5] Hrubec Products, Inc., operates a Pulp Division that manufactures wood pulp for use in the pro- duction of various paper goods. Revenue and costs associated with a ton of pulp follow: Selling price . Expenses: $70 Variable .. $42 Fixed (based on a capacity of 50,000 tons per year) . 18 60 Net operating income $10 Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be treated as a division of Hrubec with full profit responsibility. The newly formed Carton Division is currently purchasing 5,000 tons of pulp per year from a supplier at a cost of $70 per ton, less a 10% purchase discount. Hrubec's president is anxious for the Carton Division to begin purchasing its pulp from the Pulp Division if an acceptable transfer price can be worked out.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
- PROBLEM 8. The Color Company manufactures and sells two products. The selling prices and variable costs of the products are as follows: Blujets Blupens P20 Selling prices Variable costs P40 8 24 The sales for 2021 were in the ratio of 3 Blujets to 1 Blupen. Sales volume for 2021 was P1 million. Fixed costs for 2020 amounted to P390,000. Requirements: 4. If the sales mix was to change to 2 units of blujets to 1 unit of Blupen, would this have any effect on the breakeven sales? If so, what would be the new breakeven sales? 5. Assuming that the sales volume would remain at P1 million, what net income would be generated using the sales mix in number (4) above? 6. What sales revenue would be required if the firm wishes to generate a net income of P328,900 if the original mix of 3:1 prevailed?arrow_forwardQuestion Content Area Carmen Co. can further process Product J to produce Product D. Product J is currently selling for $20.10 per pound and costs $14.15 per pound to produce. Product D would sell for $44.80 per pound and would require an additional cost of $9.70 per pound to produce. The differential cost of producing Product D is a.$11.64 per pound b.$5.82 per pound c.$9.70 per pound d.$7.76 per poundarrow_forwardExercise 6-15 (Algo) Approaches for estimating stand-alone selling prices [LO6-6] Video Planet (VP) sells a big screen TV package consisting of a 60-inch plasma TV, a universal remote, and on-site installation by VP staff. The installation includes programming the remote to have the TV interface with other parts of the customer's home entertainment system. VP concludes that the TV, remote, and installation service are separate performance obligations. VP sells the 60-inch TV separately for $1,790, sells the remote separately for $120, and offers the entire package for $1,980. VP does not sell the installation service separately. VP is aware that other similar vendors charge $170 for the installation service. VP also estimates that it incurs approximately $120 of compensation and other costs for VP staff to provide the installation service. VP typically charges 50% above cost on similar sales. Required: 1. to 3. Estimate the stand-alone selling price of the installation service using…arrow_forward
- Segment X sells its product at SP of 300 per unit. Variable Cost to produce per unit is 120 per unit. Fixed cost is 100,000. X operates at full capacity. What is the minimum price that should be charged to another segment for each unit of product to be transferred? • 120 plus allocated cost of FC • 120 plus opportunity cost and other variable cost • 300 • 120arrow_forwardExercise 15-29 (Algo) Evaluate Transfer Pricing System (LO 15-2) Southfield Division offers its product to outside markets for $124. It incurs variable costs of $49 per unit and fixed costs of $143,500 per month based on monthly production of 22,900 units. Northfield Division can acquire the product from an alternate supplier for $129 per unit or from Southwest Division for a transfer price of $124 plus $6 per unit in transportation costs. Required: a. What are the costs and benefits of the alternatives available to Southfield Division and Northfield Division with respect to the transfer of Southfield Division's product? Assume that Southfield Division can market all that it can produce. b. How would your answer change if Southfield Division had idle capacity sufficient to cover all of Northfield Division's needs? a. Net benefit b. Net benefit per unit per unitarrow_forwardCompany 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_forward
- Pkg Acc Infor Systems MS VISIO CDFinanceISBN:9781133935940Author:Ulric J. GelinasPublisher:CENGAGE L