None Ivanhoe Corporation manufactures wireless soundbar speakers. It is a division of Vany TV, which manufactures televisions. Ivanhoe sells the speakers to Vany as well as to retail stores. Thefollowing information is available for Ivanhoe's speaker: unit variable cost $54; unit fixed cost $42; and a unit selling price of $126 to outside customers. Vany currently purchases speakersfrom an outside supplier for $118 each. Top management of Vany would like Ivanhoe to provide 43,000 speakers per year at a transfer price of $54 each.(a)Compute the minimum transfer price that Ivanhoe should accept assumping Ivanhoe is operating at full capacity.Minimum transfer price$(b)Compute the minimum transfer price that Ivanhoe should accept assumping Ivanhoe has sufficient excess capacity to provide the 43,000 speakers to Vany.Minimum transfer price$

Transfer pricing is that methodology which helps in deciding prices at which products should be…

Answered: Ivanhoe Corporation manufactures…

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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Bostonian Inc. has a number of divisions, including the Delta Division and the Listen Now Division. The Listen Now Division owns and operates a line of MP3 players. Each year, the Listen Now Division purchases component AZ in order to manufacture the MP3 players. Currently, it purchases this component from an outside supplier for $6.50 per component. The manager of the Delta Division has approached the manager of the Listen Now Division about selling component AZ to the Listen Now Division. The full product cost of component AZ is $3.10. The Delta Division can sell all of the component AZs it makes to outside companies for $6.50. The Listen Now Division needs 18,000 component AZs per year; the Delta Division can make up to 60,000 components per year. Required: A. Which division sets the maximum transfer price? Which division sets the minimum transfer price? Maximum Minimum B. Suppose the company policy is that all transfer take place at full cost. What is the transfer…
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The Slate Company manufactures and sells television sets. Its assembly division (AD) buys television screens from the screen division (SD) and assembles the TV sets. The SD, which is operating at capacity, incurs an incremental manufacturing cost of $65 per screen. The SD can sell all its output to the outside market at a price of $100 per screen, after incurring a variable marketing and distribution cost of $8 per screen. If the AD purchases screens from outside suppliers at a price of $100 per screen, it will incur a variable purchasing cost of $7 per screen. Slate’s division managers can act autonomously to maximize their own division’s operating income. Q. What is the minimum transfer price at which the SD manager would be willing to sell screens to the AD?
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