Managerial Accounting
17th Edition
ISBN: 9781260247787
Author: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Publisher: RENT MCG
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Question
Chapter 11, Problem 25P
1.
To determine
Transfer price: Transfer price is the price at which goods and services are transferred between divisions or centres in an organization. The price charged to transfer goods and services is recorded as an expense in the buying division and revenue in the selling division.
- The lowest transfer price acceptable by A Division.
- The highest transfer price acceptable by B Division.
- The range of acceptable transfer prices. Also, determine whether the managers probably agree to a transfer.
2.
To determine
Transfer price: Transfer price is the price at which goods and services are transferred between divisions or centres in an organization. The price charged to transfer goods and services is recorded as an expense in the buying division and revenue in the selling division.
- The lowest transfer price acceptable by A Division.
- The highest transfer price acceptable by B Division.
- The range of acceptable transfer prices. Also, determine whether there is any disagreement between the managers related to the transfer price.
- The loss in potential profits of the company as a whole.
3.
To determine
Transfer price: Transfer price is the price at which goods and services are transferred between divisions or centres in an organization. The price charged to transfer goods and services is recorded as an expense in the buying division and revenue in the selling division.
- The lowest transfer price acceptable by A Division.
- The highest transfer price acceptable by B Division.
- The range of acceptable transfer prices. Also, determine whether the managers agree to transfer.
- Whether the return on investment of the A division increases, decreases, or remains unchanged.
4.
To determine
Transfer price: Transfer price is the price at which goods and services are transferred between divisions or centres in an organization. The price charged to transfer goods and services is recorded as an expense in the buying division and revenue in the selling division.
The lowest transfer price acceptable by A Division.
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Students have asked these similar questions
Basic Transfer Pricing
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:
Managers are free to decide if they will participate in any internal transfers. All transfer prices are negotiated.
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 the lowest acceptable transfer price from the perspective of the Alpha Division?
b. What is the highest acceptable transfer price from the perspective of the Beta Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? Will the managers probably agree to a transfer? Explain.
2. Refer to case 2 shown above. A study indicates that Alpha Division can avoid $5 per unit in shipping costs on any sales to Beta Division.
a. What is the lowest acceptable transfer…
Exercise 11-13 (Algo) Transfer Pricing Situations [LO11-3]
[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 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
Number of units being sold to outside customers
Selling price per unit to outside customers
95,000
95,000
96,000
79,000
$ 50
$ 30
Variable costs per unit
Fixed costs per unit (based on capacity)
Division Y:
$ 28
$ 12
$ 6
$ 4
Number of units needed for production
17,000
17,000
Purchase price per unit now being paid to an outside
supplier
$ 43
$ 24
Exercise 11-13 (Algo) Part 2
Required:
2. Refer to the data in case B above. In this case, there will be no savings in variable selling costs on intracompany sales.
a. What is the lowest acceptable transfer price from the…
Exercise 8 (Transfer Pricing Situations)
In each of the cases below, assume that Division A has 'a product that can be
sold either to outside customers or to Division B of the same company for use
in its production process. The managers of the divisions are evaluated based
on their divisional profits.
Case
1
2
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).
100,000
100,000
P50
P30
100,000
80,000
P35
P20
P 8
Division Y:
Number of units needed for production...
Purchase price per unit now being paid to an outside
supplier..
20,000
20,000
P47
Р34
Required:
1. Refer to the data in case A above. Assume that P2 per unit in variable
selling costs can be avoided on intracompany sales. If the managers are
free to negotiate and make decisions on their own, will a transfer take
place? If so, within what range will the transfer price fall? Explain.
2.…
Chapter 11 Solutions
Managerial Accounting
Ch. 11 - Prob. 1QCh. 11 - Prob. 2QCh. 11 - Prob. 3QCh. 11 - Prob. 4QCh. 11 - Prob. 5QCh. 11 - Prob. 6QCh. 11 - Prob. 7QCh. 11 - Prob. 8QCh. 11 - Prob. 9QCh. 11 - Prob. 10Q
Ch. 11 - Prob. 1AECh. 11 - Prob. 2AECh. 11 - Prob. 1F15Ch. 11 - Prob. 2F15Ch. 11 - Prob. 3F15Ch. 11 - Prob. 4F15Ch. 11 - Prob. 5F15Ch. 11 - Prob. 6F15Ch. 11 - Prob. 7F15Ch. 11 - Prob. 8F15Ch. 11 - Prob. 9F15Ch. 11 - Prob. 10F15Ch. 11 - Prob. 11F15Ch. 11 - (
$1,000,000
300,000
700,000
500.000
$
200,000
...Ch. 11 - Prob. 13F15Ch. 11 - Prob. 14F15Ch. 11 - Prob. 15F15Ch. 11 - Prob. 1ECh. 11 - Prob. 2ECh. 11 - Prob. 3ECh. 11 - Prob. 4ECh. 11 - Prob. 5ECh. 11 - Prob. 6ECh. 11 - Prob. 7ECh. 11 - Prob. 8ECh. 11 -
EXERCISE 11-9 Return on Investment (ROI) and...Ch. 11 - Prob. 10ECh. 11 - Prob. 11ECh. 11 - Prob. 12ECh. 11 - Prob. 13ECh. 11 - Prob. 14ECh. 11 - Prob. 15ECh. 11 - Prob. 16ECh. 11 - Prob. 17PCh. 11 - Prob. 18PCh. 11 - Prob. 19PCh. 11 - Prob. 20PCh. 11 - Prob. 21PCh. 11 - Prob. 22PCh. 11 - Prob. 23PCh. 11 - Prob. 24PCh. 11 - Prob. 25PCh. 11 - Prob. 26C
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