Comm Devices (CD) is a division of Worldwide Communications, Inc. CD produces restaurant pagers and other personalcommunication devices. These devices are sold to other Worldwide divisions, as well as to other communication companies. CD wasrecently approached by the manager of the Personal Communications Division regarding a request to make a special emergency-response pager designed to receive signals from anywhere in the world. The Personal Communications Division has requested that CDproduce 12,000 units of this special pager. The following facts are available regarding the Comm Devices Division.Selling price of standard pagerVariable cost of standard pagerAdditional variable cost of special pagerFor each of the following independent situations, calculate the minimum transfer price, and determine whether the PersonalCommunications Division should accept or reject the offer.(a)The Personal Communications Division has offered to pay the CD Division $105 per pager. The CD Division has no available capacity.The CD Division would have to forgo sales of 10,000 pagers to existing customers in order to meet the request of the PersonalCommunications Division. (Note: The number of special pagers to be produced does not equal the number of existing pagers thatwould be forgone.) (Round answer to 2 decimal places, e.g. 125.36.)Minimum transfer price$$95$50$30Personal Communications Division shouldMinimum transfer price $+ the offer.(b)The Personal Communications Division has offered to pay the CD Division $150 per pager. The CD Division has no available capacity.The CD Division would have to forgo sales of 16,000 pagers to existing customers in order to meet the request of the PersonalCommunications Division. (Note: The number of special pagers to be produced does not equal the number of existing pagers thatwould be forgone.)

The Transfer price is a price at which the organization's one division transfers goods to another…

pager communication devices. These devices are sold to other Worldwide divisions, as well as to other communication companies. CD wa recently approached by the manager of the Personal Communications Division regarding a request to make a special emergency- response pager designed to receive signals from anywhere in the world. The Personal Communications Division has requested that produce 12,000 units of this special pager. The following facts are available regarding the Comm Devices Division. Selling price of standard pager Variable cost of standard pager Additional variable cost of special pager $95 $50 $30 For each of the following independent situations, calculate the minimum transfer price, and determine whether the Personal Communications Division should accept or reject the offer.

pager communication devices. These devices are sold to other Worldwide divisions, as well as to other communication companies. CD wa recently approached by the manager of the Personal Communications Division regarding a request to make a special emergency- response pager designed to receive signals from anywhere in the world. The Personal Communications Division has requested that produce 12,000 units of this special pager. The following facts are available regarding the Comm Devices Division. Selling price of standard pager Variable cost of standard pager Additional variable cost of special pager $95 $50 $30 For each of the following independent situations, calculate the minimum transfer price, and determine whether the Personal Communications Division should accept or reject the offer.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 28P

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