None !Required information[The following information applies to the questions displayed below.]In each of the cases below, assume Division X has a product that can be sold either to outside customers or toDivision Y of the same company for use in its production process. The managers of the divisions are evaluatedbased on their divisional profits.CaseABDivision X:Capacity in units104,000108,000Number of units being sold to outside customersSelling price per unit to outside customers104,00092,000$ 52$ 34Variable costs per unit$ 26$ 17Fixed costs per unit (based on capacity)$ 10$ 6Division Y:Number of units needed for production16,00016,000Purchase price per unit now being paid to an outsidesupplier$ 46$ 34Required:1. Refer to the data in case A above. Assume in this case that $2 per unit in variable selling costs can be avoided on intracompanysales.a. What is the lowest acceptable transfer price from the perspective of the selling division?b. What is the highest acceptable transfer price from the perspective of the buying division?c. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate andmake decisions on their own, will a transfer probably take place?

The price at which two or more related parties transact is called transfer price or transfer cost.…

Required: 1. Refer to the data in case A above. Assume in this case that $2 per unit in variable selling costs can be avoided on intracompany sales. a. What is the lowest acceptable transfer price from the perspective of the selling division? b. What is the highest acceptable transfer price from the perspective of the buying division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make decisions on their own, will a transfer probably take place?

Required: 1. Refer to the data in case A above. Assume in this case that $2 per unit in variable selling costs can be avoided on intracompany sales. a. What is the lowest acceptable transfer price from the perspective of the selling division? b. What is the highest acceptable transfer price from the perspective of the buying division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make decisions on their own, will a transfer probably take place?

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter14: Decentralized Operations

Section: Chapter Questions

Problem 14.16E

See similar textbooks

Similar questions

n 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: Case A B Division X: Capacity in units 140,000 140,000 Number of units being sold to outside customers 140,000 115,000 Selling price per unit to outside customers $ 54 $ 38 Variable costs per unit $ 34 $ 20 Fixed costs per unit (based on capacity) $ 12 $ 10 Division Y: Number of units needed for production 25,000 25,000 Purchase price per unit now being paid to an outside supplier $ 50 $ 37 Required:1-a. Refer to the data in case A above. Assume that $3 per unit in variable selling costs can be avoided on intracompany sales. Determine the transfer price of the selling division. 1-b. If the managers are free to negotiate and make decisions on their own, will…
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 Transfer price A Yes No 100,000 100,000 1-b. If the managers are free to negotiate and make decisions on their own, will a transfer take place? Transfer price $50 $30 $8 20,000 $47 Case B 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. 100,000 80,000 $35 $20 $6 20,000 $34 2-a. Refer to the data…
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…
[The following information applies to the questions displayed below.) In each of the cases below, assume Division X has a product that can be sold to outside customers or to Division Y of the same company. The managers of the divisions are evaluated based on their divisional profits. Case A B Division X: Capacity in units 106,000 Variable costs per unit Number of units being sold to outside customers Selling price per unit to outside customers 95,000 106,000 72,000 $ 58 $ 26 $ 24 $ 16 Fixed costs per unit (based on capacity) $ 8 $ 4 Division Y: Number of units needed for production 23,000 23,000 Purchase price per unit now being paid to an outside supplier $ 52 $ 32 Exercise 11-13 (Algo) Part 1 Required: 1. Refer to the data in case A above. Assume in this case $2 per unit in variable selling costs can be avoided on intracompany sales. a. What is the lowest acceptable transfer price from the perspective of the selling division? b. What is the highest acceptable transfer price from the…
Assume that Steel Division has a product that can be sold either to outside customers on an intermediate market or to Fabrication Division of the same company for use in its production process. The different divisions are evaluated based on their divisional profits. Steel Division:Capacity in units 200,000No. of units being sold on the intermediate market 200,000Selling price per unit on the intermediate market P90Variable cost per unit inclusive of variable selling expense of P370Fixed cost per unit (based on capacity) 13 Fabrication Division:No. of units needed for production 40,000 Purchase price per unit now being paid to as outside supplier…
Please I request, answer all the 4 parts Division 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 A Capacity in units Numbers of units now being sold to outside customers Selling price per unit to outside customers Variable costs per unit Fixed cost per unit (based on capacity) 400,000 400,000 $90 $65 SIS Division B Number of units needed annually Purchase price now being paid to an outside supplier 30,000 $89 A study indicates that Division A can avoid $5 per unit in shipping costs on any sales to Division B. Required: 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 divisioas? 4. Assume Division A offers to sell…
Chapter: Traditional performance measurement syatem & Transfer Price (Managerial Accounting) Q) Spark Ltd has two divisions, assembly and electrical. The assembly division transfers partially completed components to the electrical division at a predetermined transfer price. The assembly division’s standard variable production cost per unit is $550. This division has spare capacity, and itcould sell all its components to outside buyers at $680 per unit in a perfectly competitive market.Required:a) Determine a transfer price using the general rule.b) How would the transfer price change if the assembly division had no spare capacity? c) What transfer price would you recommend if there was no outside market for the transferred component and the assembly division had spare capacity? d) 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? (200 words)
Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their own division’s return on investment (ROI). Assume the following information relative to the two divisions: Case 1 2 3 4 Alpha Division: Capacity in units 54,000 316,000 107,000 203,000 Number of units now being sold tooutside customers 54,000 316,000 82,000 203,000 Selling price per unit to outsidecustomers $ 99 $ 40 $ 65 $ 46 Variable costs per unit $ 61 $ 17 $ 38 $ 32 Fixed costs per unit (based oncapacity) $ 25 $ 9 $ 23 $ 8 Beta Division: Number of units needed annually 9,900 69,000 18,000 64,000 Purchase price now being paid toan outside supplier $ 90 $ 38 $ 65 * — *Before any purchase discount. Required: 1. Refer to case 1 shown above. Alpha Division can avoid $5 per unit in commissions on any sales to Beta Division. a. What is Alpha Division's lowest…
Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A Division B Division C Sales 12440000$ 35550000$ 25550000$ Average operating assets 3110000$ 7110000$ 5110000$ Net operating income 547360$ 639900$ 740950$ Minimum required rate of return 10.00% 10.50% 14.50$ Required: 1.Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. 2.Compute the residual income for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 11% rate of return. a.If performance is being measured by ROI, which division or divisions will probably accept the opportunity? Reject? b.If performance is being measured by residual income, which division or divisions will probably accept the opportunity? Reject?
Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their own division’s return on investment (ROI). Assume the following information relative to the two divisions: Case 1 2 3 4 Alpha Division: Capacity in units 92,000 412,000 162,000 312,000 Number of units now being sold to outside customers 92,000 412,000 112,000 312,000 Selling price per unit to outside customers $ 54 $ 114 $ 135 $ 74 Variable costs per unit $ 42 $ 89 $ 100 $ 50 Fixed costs per unit (based on capacity) $ 6 $ 15 $ 20 $ 9 Beta Division: Number of units needed annually 17,000 42,000 32,000 122,400 Purchase price now being paid to an outside supplier $ 51 $ 113 $ 135* — *Before any purchase discount. Required: 1. Refer to case 1 shown above. Alpha Division can avoid $2 per unit in commissions on any sales to Beta Division. a. What is Alpha Division's lowest acceptable transfer price? b. What is Beta Division's…
Atascadero Industries operates a Manufacturing Division and a Marketing Division. Both divisions are evaluated as profit centers. Marketing buys products from Manufacturing and packages them for sale. Manufacturing sells many components to third parties in addition to Marketing. Selected data from the two operations follow. Capacity (units) Sales price Variable costs Fixed costs Manufacturing 1,070,000 1,750 630 $ $ a. Transfer price b. Transfer price $10,700,000 a For Manufacturing, this is the price to third parties. b For Marketing, this does not include the transfer price paid to Manufacturing. Marketing 507,000 $ 4,900 $ 1,820 $7,270,000 Required: a. Current production levels in Manufacturing are 607,000 units. Marketing requests an additional 107,000 units to produce a special order. What transfer price would you recommend? b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend? per unit per unit
Assume Division A has provided the following information regarding the one product that it manufactures and sells on the outside market Selling price per unit (on the outside market) Variable cost per unit Fixed costs per unit (based on capacity) Capacity in units $ 100 $ 60 $ 6 30,000 Division A has been offered the opportunity to sell 5,000 units of its only product to another division within the same company. The other division can either agree to a transfer price with Division A or purchase a comparable product on the outside market for $100. If Division A is currently selling 27,500 units on the outside market and the other division chooses to buy 5,000 units on the outside market (rather than agreeing to a transfer price with Division A), what is the impact on profits for the company as a whole? Multiple Choice O Profits would decrease by $100,000 Profite unnin darrasco h $70.000