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Bollozos Afterlife Corporation's Division A manufactures and sells product Brand X, which is used in refrigeration systems. Per-unit variable manufacturing and selling costs amount to P20 and P5, respectively. The Division can sell this item to external domestic customers for P36 or, alternatively, transfer the product to the company's Division B. Division B is currently purchasing a similar unit from Taiwan for P33. Assume use of the general transfer-pricing rule. • What is the most that the Division B would be willing to pay the Division A for one unit? If Division A had excess capacity, what transfer price would the Division's management set? • If Division A had no excess capacity, what transfer price would the Division's management set? If Division A had no excess capacity, what transfer price would the Division's management set assuming that Division A was able to reduce the variable cost of internal transfers by P4 per unit

Bollozos Afterlife Corporation's Division A manufactures and sells product Brand X, which is used in refrigeration systems. Per-unit variable manufacturing and selling costs amount to P20 and P5, respectively. The Division can sell this item to external domestic customers for P36 or, alternatively, transfer the product to the company's Division B. Division B is currently purchasing a similar unit from Taiwan for P33. Assume use of the general transfer-pricing rule. • What is the most that the Division B would be willing to pay the Division A for one unit? If Division A had excess capacity, what transfer price would the Division's management set? • If Division A had no excess capacity, what transfer price would the Division's management set? If Division A had no excess capacity, what transfer price would the Division's management set assuming that Division A was able to reduce the variable cost of internal transfers by P4 per unit

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 4CMA: Morrisons Plastics Division, a profit center, sells its products to external customers as well as to...
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Bollozos Afterlife Corporation's Division A manufactures and sells product Brand X, which is used in refrigeration systems. Per-unit variable manufacturing and selling costs amount to P20 and P5, respectively The Division can sell this item to external domestic customers for P36 or, alternatively, transfer the product to the company's Division B. Division B is currently purchasing a similar unit from Taiwan for P33. Assume use of the general transfer-pricing rule. •What is the most that the Division B would be willing to pay the Division A for one unit? • If Division A had excess capacity, what transfer price would the Division's management set? · If Division A had no excess capacity, what transfer price would the Divisions management set? If Division A had no excess capacity, what transfer price would the Divisions management set assuming that Division A was able to reduce the variable cost of internal transfers by P4 per unit
Transcribed Image Text:Bollozos Afterlife Corporation's Division A manufactures and sells product Brand X, which is used in refrigeration systems. Per-unit variable manufacturing and selling costs amount to P20 and P5, respectively The Division can sell this item to external domestic customers for P36 or, alternatively, transfer the product to the company's Division B. Division B is currently purchasing a similar unit from Taiwan for P33. Assume use of the general transfer-pricing rule. •What is the most that the Division B would be willing to pay the Division A for one unit? • If Division A had excess capacity, what transfer price would the Division's management set? · If Division A had no excess capacity, what transfer price would the Divisions management set? If Division A had no excess capacity, what transfer price would the Divisions management set assuming that Division A was able to reduce the variable cost of internal transfers by P4 per unit
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