Transfer Pricing The materials used by the North Division of Horton Company are currently purchased from outside suppliers at $102 per unit. These same materials are produced by Horton’s South Division. The South Division can produce the materials needed by the North Division at a variable cost of $46 per unit. The division is currently producing 154,000 units and has capacity of 220,000 units. The two divisions have recently negotiated a transfer price of $70 per unit for 66,000 units. By how much will each division's income increase as a result of this transfer? South Division $ North Division $

Transfer Pricing The materials used by the North Division of Horton Company are currently purchased from outside suppliers at $102 per unit. These same materials are produced by Horton’s South Division. The South Division can produce the materials needed by the North Division at a variable cost of $46 per unit. The division is currently producing 154,000 units and has capacity of 220,000 units. The two divisions have recently negotiated a transfer price of $70 per unit for 66,000 units. By how much will each division's income increase as a result of this transfer? South Division $ North Division $

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 6BE

See similar textbooks

Similar questions

Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of 1,350 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of 900 per unit. a. If a transfer price of 1,000 per unit is established and 75,000 units of materials are transferred, with no reduction in the Components Divisions current sales, how much would Ziegler Inc.s total operating income increase? b. How much would the Instrument Divisions operating income increase? c. How much would the Components Divisions operating income increase?
Calculating Transfer Price Teslum Inc. has a number of divisions, including the Machina Division, a producer of high-end espresso makers, and the Java Division, a chain of coffee shops. Machina Division produces the EXP-100 model espresso maker that can be used by Java Division to create various coffee drinks. The market price of the EXP-100 model is 950, and the full cost of the EXP-100 model is 475. Required: 1. If Teslum has a transfer pricing policy that requires transfer at full cost, what will the transfer price be? Do you suppose that Machina and Java divisions will choose to transfer at that price? 2. If Teslum has a transfer pricing policy that requires transfer at market price, what would the transfer price be? Do you suppose that Machina and Java divisions would choose to transfer at that price? 3. Now suppose that Teslum allows negotiated transfer pricing and that Machina Division can avoid 135 of selling expense by selling to Java Division. Which division sets the minimum transfer price, and what is it? Which division sets the maximum transfer price, and what is it? Do you suppose that Machina and Java divisions would choose to transfer somewhere in the bargaining range?
Transfer Pricing The materials used by the Multinomah Division of Isbister Company are currently purchased from outside suppliers at $90 per unit. These same materials are proc the Pembroke Division. The Pembroke Division can produce the materials needed by the Multinomah Division at a variable cost of $75 per unit. The division is curr producing 120,000 units and has capacity of 150,000 units. The two divisions have recently negotiated a transfer price of $82 per unit for 15,000 units. By how much will each division's income increase as a result of this transfer? Pembroke Division Multinomah Division $
The materials used by the North Division of Zhang Company are currently purchased from outside suppliers at $96 per unit. These same materials are produced by Zhang’s South Division. The South Division can produce the materials needed by the North Division at a variable cost of $79 per unit. The division is currently producing 630,000 units and has capacity of 750,000 units. The two divisions have recently negotiated a transfer price of $88 per unit for 72,000 units. By how much will each division's income increase as a result of this transfer? South: ? North: ?
The materials used by the North Division of Zhang Company are currently purchased from outside suppliers at $96 per unit. These same materials are produced by Zhang’s South Division. The South Division can produce the materials needed by the North Division at a variable cost of $79 per unit. The division is currently producing 630,000 units and has capacity of 750,000 units. The two divisions have recently negotiated a transfer price of $88 per unit for 72,000 units. By how much will each division's income increase as a result of this transfer? South Division $fill in the blank 1 North Division $fill in the blank 2
The materials used by the North Division of Horton Company are currently purchased from outside suppliers at $29 per unit. These same materials are produced by Horton’s South Division. The South Division can produce the materials needed by the North Division at a variable cost of $14 per unit. The division is currently producing 126,000 units and has capacity of 180,000 units. The two divisions have recently negotiated a transfer price of $20 per unit for 54,000 units. By how much will each division's income increase as a result of this transfer? South Division $ North Division $
The materials used by the North Division of Horton Company are currently purchased fromoutside suppliers at $60 per unit. These same materials are produced by Horton's SouthDivision. The South Division can produce the materials needed by the North Division at avariable cost of $42 per unit. The division is currently producing 200,000 units and hascapacity of 250,000 units. The two divisions have recently negotiated a transfer price of $52per unit for 30,000 units. By how much will each division's income increase as a result of thistransfer?
Decision on Transfer Pricing Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of $1,350 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $900 per unit. Assume that a transfer price of $1,200 has been established and that 75,000 units of materials are transferred, with no reduction in the Components Division's current sales. a. How much would Ziegler Inc.'s total operating income increase?$fill in the blank 1 b. How much would the Instrument Division's operating income increase?$fill in the blank 2 c. How much would the Components Division's operating income increase?$fill in the blank 3 d. Any transfer price will cause the total income of the company to , as long as the supplier division capacity is toward making materials for products that are…
Decision on transfer pricing Materials used by the Instrument Division of XPort Industries are currently purchased from outside suppliers at a cost of $249 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $207 per unit. Assume that a transfer price of $237 has been established and that 25,200 units of materials are transferred, with no reduction in the Components Division’s current sales. a. How much would XPort Industries’ total income from operations increase?$fill in the blank 1 b. How much would the Instrument Division’s income from operations increase?$fill in the blank 2 c. How much would the Components Division’s income from operations increase?$fill in the blank 3 d. Any transfer price will cause the total income of the company to increase , as long as the supplier division capacity is used toward making…
The Windshield division of Jaguar Company makes windshields for use in its Assembly division. The Windshield division incurs variable costs of $208 per windshield and has capacity to make 670,000 windshields per year. The market price is $530 per windshield. The Windshield division incurs total fixed costs of $4,000,000 per year. If the Windshield division has excess capacity, what is the range of possible transfer prices that could be used on transfers between the Windshield and Assembly divisions? Transfer price per windshield will be at least but not more than
Transfer Pricing Wiring used by the Appliance Division of Kaufman Manufacturing is currently purchased from outside suppliers at a cost of $25 per unit. However, the same materials are available from the Electronic Division. The Electronic Division has unused capacity and can produce the materials needed by the Appliance Division at a variable cost of $20 per unit. Assume that a transfer price of $22 has been established and that 150,000 units of materials are transferred, with no reduction in the Electronic Division’s current sales. a. How much would Kaufman Manufacturing’s total operating income increase?$ b. How much would the Appliance Division’s operating income increase?$ c. How much would the Electronic Division’s operating income increase?$ d. If the negotiated price approach is used, what would be the range of acceptable transfer prices and why?
Decision on Transfer Pricing Materials used by the Instrument Division of XPort Industries are currently purchased from outside suppliers at a cost of $193 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of $160 per unit. a. If a transfer price of $176 per unit is established and 27,900 units of materials are transferred, with no reduction in the Components Division's current sales, how much would XPort Industries’ total income from operations increase?$fill in the blank 1 b. How much would the Instrument Division’s income from operations increase?$fill in the blank 2 c. How much would the Components Division's income from operations increase?$fill in the blank 3