Pertinent transfer price, perfect and imperfect markets. Mountaineer, Ic., has two divi- sions, A and B, that manufacture expensive bicycles. Division A produces the bicycle frame, and divi- sion B assembles the rest of the bicycle onto the frame. There is a market for both the subassembly and the final product. Each division has been designated as a profit center. The transfer price for the subassembly has been set at the long-run average market price. The following data are available for each division: Selling price for final product $280 Long-run average selling price for intermediate product Incremental cost per unit for completion in division B Incremental cost per unit in division A 160 170 100 The manager of division B has made the following calculation: $280 Selling price for final product Transferred-in cost per unit (market) Incremental cost per unit for completion Contribution (loss) on product $160 170 330 S (50)

Pertinent transfer price, perfect and imperfect markets. Mountaineer, Ic., has two divi- sions, A and B, that manufacture expensive bicycles. Division A produces the bicycle frame, and divi- sion B assembles the rest of the bicycle onto the frame. There is a market for both the subassembly and the final product. Each division has been designated as a profit center. The transfer price for the subassembly has been set at the long-run average market price. The following data are available for each division: Selling price for final product $280 Long-run average selling price for intermediate product Incremental cost per unit for completion in division B Incremental cost per unit in division A 160 170 100 The manager of division B has made the following calculation: $280 Selling price for final product Transferred-in cost per unit (market) Incremental cost per unit for completion Contribution (loss) on product $160 170 330 S (50)

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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Carol Components operates a Production Division and a Packaging Division. Both divisions are evaluated as profit centers. Packaging buys components from Production and assembles them for sale. Production sells many components to third parties in addition to Packaging. Selected data from the two operations follow: Capacity (units) Sales price Variable costsb Fixed costs a For Production, this is the price to third parties. b For Packaging, this does not include the transfer price paid to Production. Suppose Production is located in Country A with a tax rate of 30 percent and Distribution in Country B with a tax rate of 10 percent. All other facts remain the same. a. Optimal transfer price b. Transfer price c Transfer price Required: a. Current output in Production is 25,300 units. Packaging requests an additional 5,960 units to produce a special order. What transfer price would you recommend? to search b. Suppose Production is operating at full capacity. What transfer price would you…
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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
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