BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

Solutions

Chapter
Section
BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Transfer pricing
Based on Kaufman Manufacturing's data in Exercise 14-17, assume that a transfer price of $22 has been established and that 150.000 units of materials are transferred, with no reduction in the Electronic Division's current sales.
a.How much would Kaufman Manufacturing's total operating income increase?
b.How much would the Appliance Division's operating income increase?
c.How much would the Electronic Division's operating income increase?
d.If the negotiated price approach is used, what would be the range of acceptable transfer prices and why?

To determine

(a)

Concept introduction:

In the Transfer Pricing, one unit is transferred from one department to another department. The price of transferred unit is decided through Company's polices. For example: - cost plus margin, fixed price, variable cost etc.

To compute:

The operating income increased of Kaufman Manufacturing if Department quoted price $22.

Explanation

Current purchased price from outside market is $25

Variable cost of electronic division is $20

Total increased in profit will be calculated as:

  Increase in operating income=(Market PriceVariable Cost)×

To determine

(b)

Concept introduction:

In the Transfer Pricing, one unit is transferred from one department to another department. The price of transferred unit is decided through Company's polices. For example: - cost plus margin, fixed price, variable cost etc.

To compute:

The operating income increased of appliance division.

To determine

(c)

Concept introduction:

In the transfer pricing, unit is transferred from one department to another department. The price of transferred unit is decided considering company polices. For example: - cost plus margin, fixed price, variable cost etc.

To compute:

The operating income increased of electronic division.

To determine

(d)

Concept introduction:

In the transfer pricing, unit is transferred from one department to another department. The price of transferred unit is decided consideringcompany polices. For example: - cost plus margin, fixed price, variable cost etc.

The range of acceptable transfer using the negotiated price approach and reasons for the same.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

FREE CASH FLOW Financial information for Powell Panther Corporation is shown here. Powell Panther Corporation: ...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

What are the common tools of public relations?

Foundations of Business (MindTap Course List)

What is meant by balanced measures?

Cornerstones of Cost Management (Cornerstones Series)