1.
Explain the reasons for which the transfer prices based on the total actual costs are not appropriate as the basis for the divisional performance measurement.
2.
Calculate the contribution margin for the Mining Division and the Metals Division by using the market price as the transfer price.
3.
Explain if Company PCR were to institute the usage of the transfer prices that are negotiated and allow divisions to buy and sell on the open market; determine the price range for the toldine that would be acceptable for both the Divisions.
4.
Using the general transfer-pricing rule calculate the lowest transfer price that would be acceptable to the Mining Division. Explain whether the answer is consistent with the conclusion that is made in requirement (3).
5.
Identify one of the three type of transfer prices is most likely to stimulate desirable management behaviour at PCRC.
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Managerial Accounting: Creating Value in a Dynamic Business Environment
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