What should the transfer price be and why?
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Q: Under what conditions is a market-based transfer price most likely to be used?
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Q: What are the calculation formulas for transfer pricing?
A: There are many methods for determining the transfer price. Most businesses actually set the transfer…
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A: Total Investment Approach: In the Total Investment Approach, there is a risk-return tradeoff in the…
Q: What are economic resources?
A: Economic resources: Assets or services of an organization carrying some economic value which can be…
Q: What is the transaction price? What additional factorsrelated to the transaction price must be…
A: The transaction price is an amount that is received by the company from the transfer of goods or…
Q: Describe Trade-Off theory.
A: Trade-Off theory suggests that there is an optimal capital structure that maximizes the value of the…
Q: What is intrinsic value or price?
A: Intrinsic value: Intrinsic value denotes to an investor's view of the intrinsic worth of an asset,…
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A: Financial accounting is the process of recording, summarizing, and reporting all the transactions in…
Q: Define net realization value?
A: Net realizable value means the amount that could be received after deducted all incidental expenses…
Q: What are funds transfer pricing?
A: Funds transfer pricing (FTP): It is a method used to estimate how financing/funding improves a…
Q: What is offer price?
A: Bid price is the maximum price which the buyer is willing to pay to purchase. In other words, it…
Q: Under what conditions is a market-based transfer price optimal?
A:
Q: What is a transaction price?
A: Transaction price: It is the price of a service or a good which is expressed relative to the similar…
Q: How can we illustrate Settlement Costs?
A: A cost is a monetary value that is incurred by the company to acquire something or to produce…
Q: What is an Acquisition costs?
A:
Q: What is target pricing? Who uses it?
A: Target pricing: A pricing method which is used to identify the price at which the product will be…
Q: Explain CMO Price Behavior and Prepayment Rates?
A: The question is based on the concept of Collateralized Mortgage Obligations (CMO) , interest rate…
Q: What properties should transfer-pricing systems have?
A:
Q: What is purchasing power parity? Why might purchasing power parity fail to hold?
A: To measure the prices of goods in different countries purchasing parity is used. As per the…
Q: What is the amount of Goodwill
A: Goodwill/Gain on Bargain purchase: Purchase consideration/Investment Add: Non controlling Interest…
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Q: What is the discounting process?
A: Discounting: It is the process where the bill is given to a bank to get the bill discounted before…
Q: Define the term Purchase Volume?
A: INTRODUCTION Purchases In accounting, the cost of making purchases during a time period with the…
Q: What is the meaning of Resource Market?
A: In business terms, anything which acts as input and contributes to the production process refers to…
Q: What is Capitalized-Equivalent Cost?
A: Cost is the price of something that buyer pays to the seller to purchase that thing.
Q: What is Transfer Pricing? What are the approaches in determining transfer prices? In your own…
A: Explanation of transfer pricing and approaches determining transfer pricing are as follows.
Q: What is frequency regarding the make or buy decision?
A: Make or Buy: Make or Buy decision are normal condition arises in front of management due to…
Q: What is goodwill?
A: Before acquiring a business, the vendor evaluates the business on various parameters. Goodwill is…
Q: what is meant by Capitalized cost?
A: Capitalized cost is a cost which is incurred in purchasing the fixed asset or making the fixed asset…
Q: What is Profit and Loss (PNL)?
A: A business organisation is established with an objective to make money and increase the worth of the…
Q: Outline the rules for identifying the optimal transfer price.
A: Transfer pricing:- Transfer pricing is considered as the value that is attached to those goods and…
Q: Briefly explain Purchasing Power Parity?
A: Purchasing Power Parity (PPP) is a theory of exchange rate determination. Purchasing power parity is…
Q: What is Modified Internal Rate of Return (MIRR) method?
A: Internal rate of return (IRR): The internal rate of return (IRR) is a measure utilized in capital…
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A: ETFs are the best popular traded option for investors looking for growth in their money with both…
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A: The advantages of applying asset allocation: Diversification: Long-term investing:…
Q: In what way do free resources becomes economic resources?
A: Economic resources are indeed the tools used to carry out economic transactions. Inputs into the…
What should the transfer price be and why?
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- Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $12. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost-based transfer price? Variable cost per unit $7.48 • Fixed cost per unit 1.97 • Division B sales price of Component X 14.50Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $12. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the full-cost-based transfer price? • Variable cost per unit $6.69 Fixed cost per unit 1.47 . Division B sales price of Component X 14,50Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $13. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the full-cost-based transfer price? Variable cost per unit $7.89 Fixed cost per unit 1.48 Division B sales price of Component X 14.5
- Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $14. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost plus assuming 22% transfer price? • Variable cost per unit $7.27 Fixed cost per unit 1.93 • Division B sales price of Component X 14.502. Division A makes a part that is sells to customers outside of the company. Data concerning this appear as follows: Sales (100,000 units) P800,000 Direct material 2 Direct labor 2 Variable Overhead 1 Variable Selling &Admin 0. 20 Fixed overhead 0.10 Fixed selling &admin 0.05 If Division B purchase the part to Division A, how much is the transfer price if the basis is: a. Variable Cost b. Full production cost c. Variable Cost + markup of 50% d. Market priceAssume you are the department B manager for Marleys manufacturing. Marley’s operates under a cost-based transfer structure. Assume you receive the majority of your raw materials from department A, which sells only to department B (they have no outside sales) Assume the market price for the items your department purchase is 15% below what you are being charged by department A of Marley’s manufacturing. Determine the operating income for department B, assuming department A “sold” department B 1,000 unit during the month and department A reduced the selling price to the market price. Round your percentage answer to one decimal.
- hello, please give more emphasis on points a,b,c, and d Spark Ltd has two divisions, assembly and electrical. The assembly division transfers partiallycompleted components to the electrical division at a predetermined transfer price. The assemblydivision’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 transferredcomponent and the assembly division had spare capacity? d) Explain how negotiation between the supplying and buying units may be used to set transferprices. How does this relate to the general transfer pricing rule?Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $14. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the full-cost plus assuming 15% transfer price? Variable cost per unit $7.16 Fixed cost per unit 1.14 Division B sales price of Component X 14.5Determining Market-Based and Negotiated Transfer Prices Carreker, Inc., has number of divisions, including the Alamosa Division, producer of surgical blades, and the Tavaris Division, a manufacturer of medical instruments. Alamosa Division produces a 2.7 cm steel blade that can be used by Tavaris Division in the production of scalpels. The market price of the blade is $20. Cost information for the blade is: Variable product cost $ 9.70 Fixed cost 5.20 Total product cost $14.90 Tavaris needs 17,000 units of the 2.7 cm blade per year. Alamosa Division is at full capacity (87,000 units of the blade). Required: 1. If Carreker, Inc., has a transfer pricing policy that requires transfer at market price, what would the transfer price be? 24 per unit Do you suppose that Alamosa and Tavaris divisions would choose to transfer at that price? Yes v 2. Now suppose that Carreker, Inc., allows negotiated transfer pricing and that Alamosa Division can avoid $1.55 of selling and distribution expense by…
- Sandpiper Inc. has a division that manufactures a component that sells for $165 and has a variable cost of $45. Another division of the company wants to purchase the component Fixed cost per unit of the component is $20. What is the minimum transfer price if the division is operating at capacity? OA. $165 OB. $45 OC. $20 OD. $65Determining Market-Based and Negotiated Transfer Prices Carreker, Inc., has a number of divisions, including the Alamosa Division, producer of surgical blades, and the Tavaris Division, a manufacturer of medical instruments. Alamosa Division produces a 2.5 cm steel blade that can be used by Tavaris Division in the production of scalpels. The market price of the blade is $25. Cost information for the blade is: Variable product cost $ 9.40 Fixed cost 5.00 Total product cost $14.40 Tavaris needs 18,000 units of the 2.5 cm blade per year. Alamosa Division is at full capacity (84,000 units of the blade). Required: 1. If Carreker, Inc., has a transfer pricing policy that requires transfer at market price, what would the transfer price be?$ fill in the blank 1per unit Do you suppose that Alamosa and Tavaris divisions would choose to transfer at that price? 2. Now suppose that Carreker, Inc., allows negotiated transfer pricing and that Alamosa Division can avoid $1.50 of selling…Division A makes a part with the following characteristics: Production capacity in units- 15,000 units Selling price to outside customers- $25 Variable cost per unit- $18 Total fixed costs- $60,000 Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division A is currently selling 10,000 units to its outside customers. What should be the lowest acceptable transfer price from the perspective of Division A?