MANAGERIAL ACCOUNTING
17th Edition
ISBN: 9781266397820
Author: Garrison
Publisher: MCG
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Question
Chapter 11, Problem 26C
1.
To determine
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.
To determine
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.
To determine
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.
To determine
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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Students have asked these similar questions
Edwards Company has two operating divisions, A and B. The following information is provided for Division A:
Unit selling price
$158
$108
$ 28
Unit variable costs
Unit fixed costs
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 $153 to purchase the product from an outside source. If Division A sells internally it can save $14.0 per unit in variable costs. Assuming that
Division A has sufficient excess capacity to produce all of the units requested by Division B, which of the following is the lowest price Division A should consider for the transfer?
Multiple Choice
$94.00
$108.00
$153.00
$144.00
Chapter: Traditional Performance Measurement Systems & Transfer Pricing (Managerial Accounting)
Q) Spark Ltd has two divisions, assembly and electrical. The assembly division transfers partially completed components to the electrical division at 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.
Requirement:
Explain 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? (Max 200 words)
Starcic Products, Incorporated, has a Connector Division that manufactures and sells a number of products, including a standard
connector. Data concerning that connector appear below:
Capacity in units
Selling price to outside customers
Variable cost per unit
Fixed cost per unit (based on capacity)
45,900
$95.00
$ 61.50
$15.00
The company has a Transmission Division that needs 6,900 special heavy-duty connectors per year. The Connector Division's variable
cost to manufacture and ship this special connector would be $66,50 per unit. Making these special connectors would require more
manufacturing resources. Therefore, the Connector Division would have to reduce its production and sales of regular connectors to
outside customers from 45,900 units per year to 38,850 units per year.
Required:
As far as the Connector Division is concerned, what is the lowest acceptable transfer price for the special connectors?
Note: Round your answer to 2 decimal places.
Lowest acceptable transfer price
Chapter 11 Solutions
MANAGERIAL ACCOUNTING
Ch. 11 - Prob. 1QCh. 11 - Prob. 2QCh. 11 - Prob. 3QCh. 11 - Prob. 4QCh. 11 - Prob. 5QCh. 11 - Prob. 6QCh. 11 - Prob. 7QCh. 11 - Prob. 8QCh. 11 - Prob. 9QCh. 11 - Prob. 10Q
Ch. 11 - Prob. 1AECh. 11 - Prob. 2AECh. 11 - Prob. 1F15Ch. 11 - Prob. 2F15Ch. 11 - Prob. 3F15Ch. 11 - Prob. 4F15Ch. 11 - Prob. 5F15Ch. 11 - Prob. 6F15Ch. 11 - Prob. 7F15Ch. 11 - Prob. 8F15Ch. 11 - Prob. 9F15Ch. 11 - Prob. 10F15Ch. 11 - Prob. 11F15Ch. 11 - (
$1,000,000
300,000
700,000
500.000
$
200,000
...Ch. 11 - Prob. 13F15Ch. 11 - Prob. 14F15Ch. 11 - Prob. 15F15Ch. 11 - Prob. 1ECh. 11 - Prob. 2ECh. 11 - Prob. 3ECh. 11 - Prob. 4ECh. 11 - Prob. 5ECh. 11 - Prob. 6ECh. 11 - Prob. 7ECh. 11 - Prob. 8ECh. 11 -
EXERCISE 11-9 Return on Investment (ROI) and...Ch. 11 - Prob. 10ECh. 11 - Prob. 11ECh. 11 - Prob. 12ECh. 11 - Prob. 13ECh. 11 - Prob. 14ECh. 11 - Prob. 15ECh. 11 - Prob. 16ECh. 11 - Prob. 17PCh. 11 - Prob. 18PCh. 11 - Prob. 19PCh. 11 - Prob. 20PCh. 11 - Prob. 21PCh. 11 - Prob. 22PCh. 11 - Prob. 23PCh. 11 - Prob. 24PCh. 11 - Prob. 25PCh. 11 - Prob. 26C
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Similar questions
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- 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_forwardDivision A makes a part with the following characteristics: Production capacity in units 31,100 units Selling price to outside customers $ 25 Variable cost per unit $ 19 Total fixed costs $ 107,200 Division B, another division of the same company, would like to purchase 16,500 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $22 each. Suppose that Division A is operating at capacity and can sell all of its output to outside customers at its usual selling price. If Division A agrees to sell the parts to Division B at $22 per unit, the company as a whole will be: Multiple Choice worse off by $99&. better off by $49&. There will be no change in the status of the company as a whole. worse off by $49&.arrow_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
- 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_forwardHu 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 $125 $200arrow_forwardDivision 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_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_forwardDivision A makes a part with the following characteristics: Production capacity in units 31,100 units Selling price to outside customers $ 25 Variable cost per unit $ 19 Total fixed costs $ 107,200 Division B, another division of the same company, would like to purchase 16,500 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $22 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 $22 price internally and Division B continues to buy from the outside supplier, the company as a whole will be: Multiple Choice worse off by $49,500 each period. worse off by $99,000 each period. worse off by $25,400 each period. worse off by $65,100 each period.arrow_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_forward
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