Chapter 27, Problem 3MC

Why is the similarity between a perfect competition and monopoly is the fact that both is faced with the same cost and production factors.

In a transfer pricing decision, which of the following factors should be considered?    Both A and B    None of the above    Market price and cost    Negotiation and target profit

Should transfers be made to division B if there is no unused capacity in division A? Is the market price the correct transfer price? Show your computations.

What is the financial advantage (disadvantage) of further processing each of the three products beyondthe split-off point?

What are joint costs? How do they affect the sell or process further decision?

Why is there often a conflict between the performance evaluation and cost-minimization objectives of transfer pricing?

2. explain the transfer pricing method that is used / can be used in this company. Explain the advantages and disadvantages?

If the minimum transfer price of the selling division is less than the maximum transfer price of the buying division, the intermediate product should be transferred internally. Do you agree or disagree? Why?