Transfer Pricing
GreenWorld Inc. is a nursery products firm. It has three divisions that grow and sell plants: the Western Division, the Southern Division, and the Canadian Division. Recently, the Southern Division of GreenWorld acquired a plastics factory that manufactures green plastic pots. These pots can be sold both externally and internally. Company policy permits each manager to decide whether to buy or sell internally. Each divisional manager is evaluated on the basis of ROI and EVA.
The Western Division had bought its plastic pots in lots of 100 from a variety of vendors. The average price paid was $75 per box of 100 pots. However, the acquisition made Rosario Sanchez-Ruiz, manager of the Western Division, wonder whether or not a more favorable price could be arranged. She decided to approach Lorne Matthews, manager of the Southern Division, to see if he wanted to offer a better price for an internal transfer. She suggested a transfer of 3,500 boxes at $70 per box.
Lorne gathered the following information regarding the cost of a box of 100 pots:
*Fixed overhead is based on $200,000/20,000 boxes.
Required:
Intermediate Accounting: Reporting And Analysis
Corporate Financial Accounting
Financial Accounting
College Accounting, Chapters 1-27
Financial & Managerial Accounting
Accounting Information Systems
Financial And Managerial Accounting
MKTG 12:STUDENT ED.-TEXT
Accounting Information Systems
STATISTICS F/BUSINESS+ECONOMICS-TEXT
Management, Loose-Leaf Version
Contemporary Marketing
Principles of Economics (MindTap Course List)
Fundamentals of Financial Management (MindTap Course List)
Principles of Macroeconomics (MindTap Course List)
Brief Principles of Macroeconomics (MindTap Course List)
Essentials of Business Communication (MindTap Course List)
Essentials of Economics (MindTap Course List)
Foundations of Business (MindTap Course List)
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
Principles of Microeconomics (MindTap Course List)
Financial Accounting
Financial & Managerial Accounting
College Accounting (Book Only): A Career Approach
Accounting (Text Only)
College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
College Accounting (Book Only): A Career Approach
Principles of Macroeconomics (MindTap Course List)
Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
Pkg Acc Infor Systems MS VISIO CD
Exploring Economics
Statistics for Business & Economics, Revised (MindTap Course List)
Fundamentals of Financial Management (MindTap Course List)
Survey of Accounting (Accounting I)
PAYROLL ACCT.,2019 ED.(LL)-TEXT
Corporate Financial Accounting
Economics For Today
Economics (MindTap Course List)
Microeconomics
Cornerstones of Cost Management (Cornerstones Series)
Macroeconomics
Practical Management Science
Purchasing and Supply Chain Management
Cornerstones of Financial Accounting
Managerial Accounting
Understanding Management (MindTap Course List)
Macroeconomics: Private and Public Choice (MindTap Course List)
Micro Economics For Today
Economics: Private and Public Choice (MindTap Course List)
MACROECONOMICS FOR TODAY
Microeconomics: Private and Public Choice (MindTap Course List)