Please I request, answer all the 4 partsDivision A and Division B are divisions within the same company. The managers of both divisions are evaluated based on their division's return on investment (ROD.Assume the following information relative to two divisions:Division ACapacity in unitsNumbers of units now being sold to outside customersSelling price per unit to outside customersVariable costs per unitFixed cost per unit (based on capacity)400,000400,000$90$65SISDivision BNumber of units needed annuallyPurchase price now being paid to an outside supplier30,000$89A study indicates that Division A can avoid $5 per unit in shipping costs on any sales to Division B.Required:Compute the following1. Calculate the lowest acceptable transfer price for the seller (Division A)?2. Calculate the highest acceptable transfer price for the buyer (Division By?3. Calculate the range of acceptable transfer prices between the two divisioas?4. Assume Division A offers to sell 30,000 units to Division B for $88 and that Division B refuses this price. What will be the loss in potential profits for the companyas a whole and for each division?For the toolbar, press ALT F10 (PC) or ALT FN+F10 (Mac

Transfer price is the price that would be charged by selling division to purchasing division for…

Compute the following 1. Calculate the lowest acceptable transfer price for the seller (Division A)? 2. Calculate the highest acceptable transfer price for the buyer (Division By? 3. Calculate the range of acceptable transfer prices between the two divisions? 4. Assume Division A offers to sell 30,000 units to Division B for $88 and that Division B refuses this price. What will be the loss in potential profits for the company as a whole and for each division?

Compute the following 1. Calculate the lowest acceptable transfer price for the seller (Division A)? 2. Calculate the highest acceptable transfer price for the buyer (Division By? 3. Calculate the range of acceptable transfer prices between the two divisions? 4. Assume Division A offers to sell 30,000 units to Division B for $88 and that Division B refuses this price. What will be the loss in potential profits for the company as a whole and for each division?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question Content Area In Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is as follows: Case 1 Case 2 Division A: Capacity in units 100,000 100,000 Number of units sold externally 100,000 60,000 Market selling price $90 $75 Variable costs per unit $73 $58 Fixed costs per unit based on capacity $10 $10 Division B: Number of units needed for production 40,000 40,000 Purchase price per unit from external supplier $86 $74 The company uses the opportunity cost approach to transfer pricing. What is the maximum transfer price in Case 2?
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In each of the cases below, assume that Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits: Division X: Capacity in units Number of units being sold to outside customers Selling price per unit to outside customers Variable costs per unit Fixed costs per unit (based on capacity) Division Y: Number of units needed for production Purchase price per unit now being paid to an outside supplier Case A B 100,000 100,000 100,000 80,000 $50 $35 $30 $20 $8 $6 20,000 $47 20,000 $34 Required: 1-a. Refer to the data in case A above. Assume that $2 per unit in variable selling costs can be avoided on intracompany sales. Determine the transfer price of the selling division. Transfer price 1-b. If the managers are free to negotiate and make decisions on their own, will a transfer take place? Yes No 2-a. Refer to the data in case B…
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)
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