Compute lowest and highest acceptable transfer price, range of acceptable transfer prices, and should company transfer carried out or reject if company sells 20,000 speakers. Introduction: Transfer prices means the price charged on the product or service provided by on department of the company to another department of the company. Divisions are evaluated on the profit basis, or residual income price must be fixed for the transfer. Prices charged in these situations are referred as transfer prices.

Question

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Answer 1

Question

Chapter 11A, Problem 11A.1E

1.

To determine

Compute lowest and highest acceptable transfer price, range of acceptable transfer prices, and should company transfer carried out or reject if company sells 20,000 speakers.

Introduction: Transfer prices means the price charged on the product or service provided by on department of the company to another department of the company. Divisions are evaluated on the profit basis, or residual income price must be fixed for the transfer. Prices charged in these situations are referred as transfer prices.

1.

Expert Solution

Answer to Problem 11A.1E

Lowest acceptable transfer price is $42 and highest acceptable transfer price is $57.

Explanation of Solution

Transfer price for lowest acceptable price.

Transfer price≥ Variable cost per unit+Total contribution margin on lost salesNumber of units transferred Transfer price≥ $42+$0$5,000Transfer price≥ $42

Transfer price for highest acceptable price:

If company can buy the speakers from outside supplier for $57 then the transfer price for highest acceptable price will be $57. So it is acceptable for the company to pay the price that is the market price.

Transfer price≤ Cost of buying from outside supplier= $57

By combining the requirements of selling division and buying division the acceptable transfer price will be $42 if 5,000 speakers are sold. Managers understand their own businesses so they will be ready to accept this transfer price.
If seen from the standpoint of the company the transfer should take place. By combining the requirements of selling division and buying division the acceptable transfer price will be $42 if 5,000 speakers are sold. Company sold speakers for $42 than selling them at $57 that is the market price.

2.

To determine

Compute lowest and highest acceptable transfer price, range of acceptable transfer prices, and should company transfer carried out or reject if company sells all speakers.

Introduction: Transfer prices means the price charged on the product or service provided by on department of the company to another department of the company. Divisions are evaluated on the profit basis, or residual income price must be fixed for the transfer. Prices charged in these situations are referred as transfer prices.

2.

Expert Solution

Answer to Problem 11A.1E

Lowest acceptable transfer price is $60 and highest acceptable transfer price is $57.

Explanation of Solution

Transfer price for lowest acceptable price.

Transfer price≥ Variable cost per unit+Total contribution margin on lost salesNumber of units transferred Transfer price≥ $42+( $60−$42)×$5,000$5,000Transfer price≥ $60

Transfer price for highest acceptable price:

Company will not be ready to pay more than $57 per speaker as it will be costly for the company for buy it.

By combining the requirements of selling division and buying division in the acceptable transfer price, selling division should have $60 and buying division should not pay more than $57. The agreement made that transfer the speakers is not good to carry out.
The standpoint of the company, company should not carry on the transfer. By combining the requirements of selling division and buying division in the acceptable transfer price, selling division should have $60 and buying division should not pay more than $57. Here company saves $3 by giving up revenues of $60 and saving the $57.

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Students have asked these similar questions

Exercise 11-3 (Algo) Transfer Pricing Basics [LO11-3] Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow: Selling price per unit on the intermediate market $ 120 Variable costs per unit $ 102 Fixed costs per unit (based on capacity) $ 8 Capacity in units 25,000 Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 5,000 speakers per year. It has received a quote of $117 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits. Required: 1. Assume the Audio Division sells only 20,000 speakers per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers…

Answer 1234 with solution Alexi Division of Dezi Company makes and sells only one product. Annual data on Alexi division’s single products follows: Unit selling price ............................. P50 Unit variable cost ............................. 30 Total fixed costs .............................P200,000 Average operating assets ............... 750,000 Minimum required rate of return ........ 12% If Alexi sells 15,000 units per year, how much is the residual income? If Alexi sells 16,000 units per year, what is the return on investment? Suppose the manager of Alexi division desires a return on investment of 22%. In order to achieve this goal, how many units per year Alexi division must sell? Suppose the manager of Alexi division desires an annual residual income of P45,000. In order to achieve this, how many units Alexi division should sell?

Answer 2

Question

Chapter 11A, Problem 11A.1E

1.

To determine

Compute lowest and highest acceptable transfer price, range of acceptable transfer prices, and should company transfer carried out or reject if company sells 20,000 speakers.

Introduction: Transfer prices means the price charged on the product or service provided by on department of the company to another department of the company. Divisions are evaluated on the profit basis, or residual income price must be fixed for the transfer. Prices charged in these situations are referred as transfer prices.

1.

Expert Solution

Answer to Problem 11A.1E

Lowest acceptable transfer price is $42 and highest acceptable transfer price is $57.

Explanation of Solution

Transfer price for lowest acceptable price.

Transfer price≥ Variable cost per unit+Total contribution margin on lost salesNumber of units transferred Transfer price≥ $42+$0$5,000Transfer price≥ $42

Transfer price for highest acceptable price:

If company can buy the speakers from outside supplier for $57 then the transfer price for highest acceptable price will be $57. So it is acceptable for the company to pay the price that is the market price.

Transfer price≤ Cost of buying from outside supplier= $57

By combining the requirements of selling division and buying division the acceptable transfer price will be $42 if 5,000 speakers are sold. Managers understand their own businesses so they will be ready to accept this transfer price.
If seen from the standpoint of the company the transfer should take place. By combining the requirements of selling division and buying division the acceptable transfer price will be $42 if 5,000 speakers are sold. Company sold speakers for $42 than selling them at $57 that is the market price.

2.

To determine

Compute lowest and highest acceptable transfer price, range of acceptable transfer prices, and should company transfer carried out or reject if company sells all speakers.

Introduction: Transfer prices means the price charged on the product or service provided by on department of the company to another department of the company. Divisions are evaluated on the profit basis, or residual income price must be fixed for the transfer. Prices charged in these situations are referred as transfer prices.

2.

Expert Solution

Answer to Problem 11A.1E

Lowest acceptable transfer price is $60 and highest acceptable transfer price is $57.

Explanation of Solution

Transfer price for lowest acceptable price.

Transfer price≥ Variable cost per unit+Total contribution margin on lost salesNumber of units transferred Transfer price≥ $42+( $60−$42)×$5,000$5,000Transfer price≥ $60

Transfer price for highest acceptable price:

Company will not be ready to pay more than $57 per speaker as it will be costly for the company for buy it.

By combining the requirements of selling division and buying division in the acceptable transfer price, selling division should have $60 and buying division should not pay more than $57. The agreement made that transfer the speakers is not good to carry out.
The standpoint of the company, company should not carry on the transfer. By combining the requirements of selling division and buying division in the acceptable transfer price, selling division should have $60 and buying division should not pay more than $57. Here company saves $3 by giving up revenues of $60 and saving the $57.

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Answer 3

Question

Chapter 11A, Problem 11A.1E

1.

To determine

Compute lowest and highest acceptable transfer price, range of acceptable transfer prices, and should company transfer carried out or reject if company sells 20,000 speakers.

Introduction: Transfer prices means the price charged on the product or service provided by on department of the company to another department of the company. Divisions are evaluated on the profit basis, or residual income price must be fixed for the transfer. Prices charged in these situations are referred as transfer prices.

1.

Expert Solution

Answer to Problem 11A.1E

Lowest acceptable transfer price is $42 and highest acceptable transfer price is $57.

Explanation of Solution

Transfer price for lowest acceptable price.

Transfer price≥ Variable cost per unit+Total contribution margin on lost salesNumber of units transferred Transfer price≥ $42+$0$5,000Transfer price≥ $42

Transfer price for highest acceptable price:

If company can buy the speakers from outside supplier for $57 then the transfer price for highest acceptable price will be $57. So it is acceptable for the company to pay the price that is the market price.

Transfer price≤ Cost of buying from outside supplier= $57

By combining the requirements of selling division and buying division the acceptable transfer price will be $42 if 5,000 speakers are sold. Managers understand their own businesses so they will be ready to accept this transfer price.
If seen from the standpoint of the company the transfer should take place. By combining the requirements of selling division and buying division the acceptable transfer price will be $42 if 5,000 speakers are sold. Company sold speakers for $42 than selling them at $57 that is the market price.

2.

To determine

Compute lowest and highest acceptable transfer price, range of acceptable transfer prices, and should company transfer carried out or reject if company sells all speakers.

Introduction: Transfer prices means the price charged on the product or service provided by on department of the company to another department of the company. Divisions are evaluated on the profit basis, or residual income price must be fixed for the transfer. Prices charged in these situations are referred as transfer prices.

2.

Expert Solution

Answer to Problem 11A.1E

Lowest acceptable transfer price is $60 and highest acceptable transfer price is $57.

Explanation of Solution

Transfer price for lowest acceptable price.

Transfer price≥ Variable cost per unit+Total contribution margin on lost salesNumber of units transferred Transfer price≥ $42+( $60−$42)×$5,000$5,000Transfer price≥ $60

Transfer price for highest acceptable price:

Company will not be ready to pay more than $57 per speaker as it will be costly for the company for buy it.

By combining the requirements of selling division and buying division in the acceptable transfer price, selling division should have $60 and buying division should not pay more than $57. The agreement made that transfer the speakers is not good to carry out.
The standpoint of the company, company should not carry on the transfer. By combining the requirements of selling division and buying division in the acceptable transfer price, selling division should have $60 and buying division should not pay more than $57. Here company saves $3 by giving up revenues of $60 and saving the $57.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 11A, Problem 11A.1E

1.

To determine

Compute lowest and highest acceptable transfer price, range of acceptable transfer prices, and should company transfer carried out or reject if company sells 20,000 speakers.

Introduction: Transfer prices means the price charged on the product or service provided by on department of the company to another department of the company. Divisions are evaluated on the profit basis, or residual income price must be fixed for the transfer. Prices charged in these situations are referred as transfer prices.

1.

Expert Solution

Answer to Problem 11A.1E

Lowest acceptable transfer price is $42 and highest acceptable transfer price is $57.

Explanation of Solution

Transfer price for lowest acceptable price.

Transfer price≥ Variable cost per unit+Total contribution margin on lost salesNumber of units transferred Transfer price≥ $42+$0$5,000Transfer price≥ $42

Transfer price for highest acceptable price:

If company can buy the speakers from outside supplier for $57 then the transfer price for highest acceptable price will be $57. So it is acceptable for the company to pay the price that is the market price.

Transfer price≤ Cost of buying from outside supplier= $57

By combining the requirements of selling division and buying division the acceptable transfer price will be $42 if 5,000 speakers are sold. Managers understand their own businesses so they will be ready to accept this transfer price.
If seen from the standpoint of the company the transfer should take place. By combining the requirements of selling division and buying division the acceptable transfer price will be $42 if 5,000 speakers are sold. Company sold speakers for $42 than selling them at $57 that is the market price.

2.

To determine

Compute lowest and highest acceptable transfer price, range of acceptable transfer prices, and should company transfer carried out or reject if company sells all speakers.

Introduction: Transfer prices means the price charged on the product or service provided by on department of the company to another department of the company. Divisions are evaluated on the profit basis, or residual income price must be fixed for the transfer. Prices charged in these situations are referred as transfer prices.

2.

Expert Solution

Answer to Problem 11A.1E

Lowest acceptable transfer price is $60 and highest acceptable transfer price is $57.

Explanation of Solution

Transfer price for lowest acceptable price.

Transfer price≥ Variable cost per unit+Total contribution margin on lost salesNumber of units transferred Transfer price≥ $42+( $60−$42)×$5,000$5,000Transfer price≥ $60

Transfer price for highest acceptable price:

Company will not be ready to pay more than $57 per speaker as it will be costly for the company for buy it.

By combining the requirements of selling division and buying division in the acceptable transfer price, selling division should have $60 and buying division should not pay more than $57. The agreement made that transfer the speakers is not good to carry out.
The standpoint of the company, company should not carry on the transfer. By combining the requirements of selling division and buying division in the acceptable transfer price, selling division should have $60 and buying division should not pay more than $57. Here company saves $3 by giving up revenues of $60 and saving the $57.

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Answer 5

Chapter 11A, Problem 11A.1E

1.

To determine

Compute lowest and highest acceptable transfer price, range of acceptable transfer prices, and should company transfer carried out or reject if company sells 20,000 speakers.

Introduction: Transfer prices means the price charged on the product or service provided by on department of the company to another department of the company. Divisions are evaluated on the profit basis, or residual income price must be fixed for the transfer. Prices charged in these situations are referred as transfer prices.

1.

Expert Solution

Answer to Problem 11A.1E

Lowest acceptable transfer price is $42 and highest acceptable transfer price is $57.

Explanation of Solution

Transfer price for lowest acceptable price.

Transfer price≥ Variable cost per unit+Total contribution margin on lost salesNumber of units transferred Transfer price≥ $42+$0$5,000Transfer price≥ $42

Transfer price for highest acceptable price:

If company can buy the speakers from outside supplier for $57 then the transfer price for highest acceptable price will be $57. So it is acceptable for the company to pay the price that is the market price.

Transfer price≤ Cost of buying from outside supplier= $57

By combining the requirements of selling division and buying division the acceptable transfer price will be $42 if 5,000 speakers are sold. Managers understand their own businesses so they will be ready to accept this transfer price.
If seen from the standpoint of the company the transfer should take place. By combining the requirements of selling division and buying division the acceptable transfer price will be $42 if 5,000 speakers are sold. Company sold speakers for $42 than selling them at $57 that is the market price.

2.

To determine

Compute lowest and highest acceptable transfer price, range of acceptable transfer prices, and should company transfer carried out or reject if company sells all speakers.

Introduction: Transfer prices means the price charged on the product or service provided by on department of the company to another department of the company. Divisions are evaluated on the profit basis, or residual income price must be fixed for the transfer. Prices charged in these situations are referred as transfer prices.

2.

Expert Solution

Answer to Problem 11A.1E

Lowest acceptable transfer price is $60 and highest acceptable transfer price is $57.

Explanation of Solution

Transfer price for lowest acceptable price.

Transfer price≥ Variable cost per unit+Total contribution margin on lost salesNumber of units transferred Transfer price≥ $42+( $60−$42)×$5,000$5,000Transfer price≥ $60

Transfer price for highest acceptable price:

Company will not be ready to pay more than $57 per speaker as it will be costly for the company for buy it.

By combining the requirements of selling division and buying division in the acceptable transfer price, selling division should have $60 and buying division should not pay more than $57. The agreement made that transfer the speakers is not good to carry out.
The standpoint of the company, company should not carry on the transfer. By combining the requirements of selling division and buying division in the acceptable transfer price, selling division should have $60 and buying division should not pay more than $57. Here company saves $3 by giving up revenues of $60 and saving the $57.

Answer 6

Chapter 11A, Problem 11A.1E

1.

To determine

Compute lowest and highest acceptable transfer price, range of acceptable transfer prices, and should company transfer carried out or reject if company sells 20,000 speakers.

Introduction: Transfer prices means the price charged on the product or service provided by on department of the company to another department of the company. Divisions are evaluated on the profit basis, or residual income price must be fixed for the transfer. Prices charged in these situations are referred as transfer prices.

1.

Expert Solution

Answer to Problem 11A.1E

Lowest acceptable transfer price is $42 and highest acceptable transfer price is $57.

Explanation of Solution

Transfer price for lowest acceptable price.

Transfer price≥ Variable cost per unit+Total contribution margin on lost salesNumber of units transferred Transfer price≥ $42+$0$5,000Transfer price≥ $42

Transfer price for highest acceptable price:

If company can buy the speakers from outside supplier for $57 then the transfer price for highest acceptable price will be $57. So it is acceptable for the company to pay the price that is the market price.

Transfer price≤ Cost of buying from outside supplier= $57

By combining the requirements of selling division and buying division the acceptable transfer price will be $42 if 5,000 speakers are sold. Managers understand their own businesses so they will be ready to accept this transfer price.
If seen from the standpoint of the company the transfer should take place. By combining the requirements of selling division and buying division the acceptable transfer price will be $42 if 5,000 speakers are sold. Company sold speakers for $42 than selling them at $57 that is the market price.

Answer 7

Chapter 11A, Problem 11A.1E

1.

To determine

Compute lowest and highest acceptable transfer price, range of acceptable transfer prices, and should company transfer carried out or reject if company sells 20,000 speakers.

Introduction: Transfer prices means the price charged on the product or service provided by on department of the company to another department of the company. Divisions are evaluated on the profit basis, or residual income price must be fixed for the transfer. Prices charged in these situations are referred as transfer prices.

Answer 8

1.

Expert Solution

Answer to Problem 11A.1E

Lowest acceptable transfer price is $42 and highest acceptable transfer price is $57.

Answer 9

1.

Expert Solution

Answer 10

1.

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Transfer price for lowest acceptable price.

Transfer price≥ Variable cost per unit+Total contribution margin on lost salesNumber of units transferred Transfer price≥ $42+$0$5,000Transfer price≥ $42

Transfer price for highest acceptable price:

If company can buy the speakers from outside supplier for $57 then the transfer price for highest acceptable price will be $57. So it is acceptable for the company to pay the price that is the market price.

Transfer price≤ Cost of buying from outside supplier= $57

By combining the requirements of selling division and buying division the acceptable transfer price will be $42 if 5,000 speakers are sold. Managers understand their own businesses so they will be ready to accept this transfer price.
If seen from the standpoint of the company the transfer should take place. By combining the requirements of selling division and buying division the acceptable transfer price will be $42 if 5,000 speakers are sold. Company sold speakers for $42 than selling them at $57 that is the market price.

Answer 13

2.

To determine

Compute lowest and highest acceptable transfer price, range of acceptable transfer prices, and should company transfer carried out or reject if company sells all speakers.

Introduction: Transfer prices means the price charged on the product or service provided by on department of the company to another department of the company. Divisions are evaluated on the profit basis, or residual income price must be fixed for the transfer. Prices charged in these situations are referred as transfer prices.

2.

Expert Solution

Answer to Problem 11A.1E

Lowest acceptable transfer price is $60 and highest acceptable transfer price is $57.

Explanation of Solution

Transfer price for lowest acceptable price.

Transfer price≥ Variable cost per unit+Total contribution margin on lost salesNumber of units transferred Transfer price≥ $42+( $60−$42)×$5,000$5,000Transfer price≥ $60

Transfer price for highest acceptable price:

Company will not be ready to pay more than $57 per speaker as it will be costly for the company for buy it.

By combining the requirements of selling division and buying division in the acceptable transfer price, selling division should have $60 and buying division should not pay more than $57. The agreement made that transfer the speakers is not good to carry out.
The standpoint of the company, company should not carry on the transfer. By combining the requirements of selling division and buying division in the acceptable transfer price, selling division should have $60 and buying division should not pay more than $57. Here company saves $3 by giving up revenues of $60 and saving the $57.

Answer 14

2.

To determine

Compute lowest and highest acceptable transfer price, range of acceptable transfer prices, and should company transfer carried out or reject if company sells all speakers.

Introduction: Transfer prices means the price charged on the product or service provided by on department of the company to another department of the company. Divisions are evaluated on the profit basis, or residual income price must be fixed for the transfer. Prices charged in these situations are referred as transfer prices.

Answer 15

2.

Expert Solution

Answer to Problem 11A.1E

Lowest acceptable transfer price is $60 and highest acceptable transfer price is $57.

Answer 16

2.

Expert Solution

Answer 17

2.

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Transfer price for lowest acceptable price.

Transfer price≥ Variable cost per unit+Total contribution margin on lost salesNumber of units transferred Transfer price≥ $42+( $60−$42)×$5,000$5,000Transfer price≥ $60

Transfer price for highest acceptable price:

Company will not be ready to pay more than $57 per speaker as it will be costly for the company for buy it.

By combining the requirements of selling division and buying division in the acceptable transfer price, selling division should have $60 and buying division should not pay more than $57. The agreement made that transfer the speakers is not good to carry out.
The standpoint of the company, company should not carry on the transfer. By combining the requirements of selling division and buying division in the acceptable transfer price, selling division should have $60 and buying division should not pay more than $57. Here company saves $3 by giving up revenues of $60 and saving the $57.

Answer 20

Ch. 11A - Prob. 11A.1E Ch. 11A - Prob. 11A.2E Ch. 11A - Prob. 11A.3E Ch. 11A - Prob. 11A.4P Ch. 11A - Prob. 11A.5P Ch. 11A - Prob. 11A.6P Ch. 11A - Prob. 11A.7C

Answer to Problem 11A.1E

Explanation of Solution

Answer to Problem 11A.1E

Explanation of Solution

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Chapter 11A Solutions