1.
Introduction:
Transfer price is the price at which goods and services are transferred between divisions in an organization. The price charged to transfer goods and services is recorded as an expense in the buying division and revenue in the selling division.
The lowest transfer price acceptable by Electrical Division. Also, determine whether the Electrical division supplies the units to the Brake division.
2.
Introduction:
Transfer price is the price at which goods and services are transferred between divisions in an organization. The price charged to transfer goods and services is recorded as an expense in the buying division and revenue in the selling division.
The financial advantage or disadvantage for the company as a whole if the Electrical Division sells units to the Brake Division.
3.
Introduction:
Transfer price is the price at which goods and services are transferred between divisions in an organization. The price charged to transfer goods and services is recorded as an expense in the buying division and revenue in the selling division.
The highest transfer price acceptable by Beta Division. Also, determine at what transfer price both the division manager agree to transfer the supplies.
4.
Introduction:
Transfer price is the price at which goods and services are transferred between divisions in an organization. The price charged to transfer goods and services is recorded as an expense in the buying division and revenue in the selling division.
The organizational behavior problem and the advice to the president of the company.
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- Sandpiper 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_forwardpackman company has a division that manufactures a component that sells for $72 and has variable costs of $29 and fixed costs of $18. another division wants to purchase the component. what is the minimum transfer price if the division is operating at capacity? a. $72 b. $29 c. $47 d. $18arrow_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 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_forward
- Atascadero Industries operates a Manufacturing Division and a Marketing Division. Both divisions are evaluated as profit centers. Marketing buys products from Manufacturing and packages them for sale. Manufacturing sells many components to third parties in addition to Marketing. Selected data from the two operations follow. Capacity (units) Sales price Variable costs Fixed costs Manufacturing 1,070,000 1,750 630 $ $ a. Transfer price b. Transfer price $10,700,000 a For Manufacturing, this is the price to third parties. b For Marketing, this does not include the transfer price paid to Manufacturing. Marketing 507,000 $ 4,900 $ 1,820 $7,270,000 Required: a. Current production levels in Manufacturing are 607,000 units. Marketing requests an additional 107,000 units to produce a special order. What transfer price would you recommend? b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend? per unit per unitarrow_forwardTransfer Pricing from the Viewpoint of the Entire Company Division A manufactures electronic circuit boards. The boards can be sold either to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A: 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 $100 in additional variable cost per instrument and then sold the instruments for $300 each. Required: 1. Prepare income statements for Division A, Division B, and the company as a whole. 2. Assume Division A’s manufacturing capacity is 20,000 circuit boards. Next year, Division B wants to purchase 5,000 circuit boards from Division A rather than 4,000. (Circuit boards of this type are not available from outside sources.) From the standpoint of the company as a whole, should Division A sell the 1,000…arrow_forwardIn the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below: Case 1 Case 2 Division A: Capacity in units 100,000 100,000 Number of units sold externally 100,000 60,000 Market selling price $90 $75 Variable costs per unit 73 58 Fixed costs per unit based on capacity 10 10 Division B: Number of units needed for production 40,000 40,000 Purchase price per unit from external supplier $86 $74 The company uses the opportunity cost approach to transfer pricing. Which case should not be transferred internally? a.Both should be transferred internally. b.Neither should be transferred internally. c.Case 1 d.Case 2arrow_forward
- Division A of SLG Company produces a part it sells to other companies. Sales and cost data for the part are as follows: Capacity in units 60,000 units Selling price per unit O $27 per unit O $39 per unit O $36 per unit O $41 per unit Variable cost per unit O None of the above. Fixed cost per unit at capacity Division B, another division of SLG Company, would like to buy this part from Division A. Division B is currently purchasing the part from an outside source at $38 per unit. If Division A sells to Division B, then $1 in Division A's variable costs can be avoided. Assume Division A has enough idle capacity to handle all of Division B's needs without any increase in fixed costs and without interfering with outside sales. According to the transfer pricing guidelines, what is the lowest acceptable transfer price from the perspective of Division A? $40 per unit $28 per unit $9 per unitarrow_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(Appendix 11A) Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below: $40 $30 $10,000 20,000 Selling Price to Outside Customers Variable cost per Unit Total Fixed Costs Capacity in Units Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $38 per unit and would substitute the part made by Division A. Division B requires 5,000 units of the part each period. Division A has ample capacity to produce the units for Division B without any increase in fixed costs and without cutting into sales to outside customers. If Division A sells to Division B rather than to outside customers, the variable cost per unit would be $1 lower. What should be the lowest acceptable transfer price from the perspective of Division A? Multiple Choice $40. $30. $29.arrow_forward
- Hu Corporation has two operating divisions, A and B. The following information is provided for Division A: Unit selling price $200 Unit variable $120 costs Unit fixed costs $ 40 Division B uses the type of product produced by Division A and has approached Division A about buying the product internally. Division B is currently paying $180 to purchase the product from an outside source. If Division A sells internally, it can save $5 per unit in variable costs. Assuming Division A is operating at capacity, what price should it charge Division B if the transfer is to be made? Multiple Choice $115 $195 X $125 $200arrow_forwardAtascadero Industries operates a Manufacturing Division and a Marketing Division. Both divisions are evaluated as profit centers. Marketing buys products from Manufacturing and packages them for sale. Manufacturing sells many components to third parties in addition to Marketing. Selected data from the two operations follow. Manufacturing Marketing 1,020,000 %24 Capacity (units) sales price variable costs Fixed costs 502,000 1,500 4,650 $4 580 1,720 $10,200, 000 $7,220, 000 a. For Manufacturing, this is the price to third partles. For Marketing, this does not include the transfer price paid to Manufacturing. Suppose Manufacturing is located in Country X with a tax rate of 70 percent and Marketing in Country Y with a tax rate of 30 percent. All other facts remain the same, Requlred: a. Current production levels in Manufacturing are 520,000 units. Marketing requests an additional 120.000 units to produce a speclal order. What transfer price would youu recommend? b. Suppose Manufacturing…arrow_forwardThe Sunland Company is a multidivisional company. Its managers have full responsibility for profits and complete autonomy to accept or reject transfers from other divisions. Division A produces a sub-assembly part for which there is a competitive market. Division B currently uses this sub-assembly for a final product that is sold outside at $1,392. Division A charges Division B the market price of $812 per unit of the part. Unit variable costs are $604 and $696 for Divisions A and B, respectively. The manager of Division B feels that Division A should transfer the part at a lower price than market because at market, Division B is unable to make a profit. (a) Your answer has been saved. See score details after the due date. Calculate Division B's contribution margin if transfers are made at the market price, and calculate the company's total contribution margin. (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45).) Division B's…arrow_forward
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