Division A of SLG Company produces a part it sells to other companies. Sales and cost data for the part are as follows:Capacity in units60,000 unitsSelling price perunitO $27 per unitO $39 per unitO $36 per unitO $41 per unitVariable cost perunitO None of the above.Fixed cost per unitat capacityDivision B, another division of SLG Company, would like to buy this part from Division A. Division B is currently purchasing thepart from an outside source at $38 per unit. If Division A sells to Division B, then $1 in Division A's variable costs can be avoided.Assume Division A has enough idle capacity to handle all of Division B's needs without any increase in fixed costs and withoutinterfering with outside sales. According to the transfer pricing guidelines, what is the lowest acceptable transfer price from theperspective of Division A?$40 per unit$28 per unit$9 per unit

Lets understand the basics.When transfer is made between two departments of the same entity then…

Capacity in units Selling price per unit Variable cost per unit Fixed cost per unit at capacity 60,000 units $40 per unit $28 per unit $9 per unit Division B, another division of SLG Company, would like to buy this part from Division A. Division B is currently pa part from an outside source at $38 per unit. If Division A sells to Division B, then $1 in Division A's variable costs Assume Division A has enough idle capacity to handle all of Division B's needs without any increase in fixed costs interfering with outside sales. According to the transfer pricing guidelines, what is the lowest acceptable transfer perspective of Division A?

Capacity in units Selling price per unit Variable cost per unit Fixed cost per unit at capacity 60,000 units $40 per unit $28 per unit $9 per unit Division B, another division of SLG Company, would like to buy this part from Division A. Division B is currently pa part from an outside source at $38 per unit. If Division A sells to Division B, then $1 in Division A's variable costs Assume Division A has enough idle capacity to handle all of Division B's needs without any increase in fixed costs interfering with outside sales. According to the transfer pricing guidelines, what is the lowest acceptable transfer perspective of Division A?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 31P: Morrill Company produces two different types of gauges: a density gauge and a thickness gauge. The...

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Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below: Selling price to outside customers Variable cost per unit Total fixed costs Capacity in (units) Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $74 per unit and would substitute the part made by Division A. Division B requires 5,200 units of the part each period. Division A can already sell all of the units it can produce on the outside market. What should be the lowest acceptable transfer price from the perspective of Division A? e to search Multiple Choice $71 $77 4 $ 77 $ 55 $ 432,000 27,000 O Ai 21. 37°F Cloudy ^4.
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 14.50
Company 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
Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below: Selling price to outside customers $ 75 Variable cost per unit $ 50 Total fixed costs $ 400,000 Capacity in (units) 25,000 Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $70 per unit and would substitute the part made by Division A. Division B requires 5,000 units of the part each period. Division A can already sell all of the units it can produce on the outside market. What should be the lowest acceptable transfer price from the perspective of Division A? Multiple Choice $75. $66. $50. $16.
Company 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 cost-based transfer price? Variable cost per unit $6.31 Fixed cost per unit 1.36 Division B sales price of Component X 14.5
2. 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 price
Company 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 market-based transfer price? • Variable cost per unit $6 • Fixed cost per unit 1.65 • Division B sales price of Component X 14.50
XYZ Co has two divisions, X and Y. Division X makes a component for washing machines which it can only sell to Division Y. It has no other outlet for sales. Current information relating to Division X is as follows: Marginal cost per unit $1000 Transfer price of the component $1650 Total production and sales of the component each year 2,200 units Specific fixed costs of Division X per year $100,000 ABC has offered to sell the component to Division Y for $1400 per unit. If Division Y accepts this offer, Division X will be closed. 1. What is the minimum and maximum transfer price? 2. What will happen to XYZ’s profits if Division Y accepts the supplier’s offer and Division X is closed? 3. Assuming if Division Y buys from the outside supplier the facilities currently used to produce the component can be used to produce another product which will result in a contribution margin of $75,000. Division X cannot manufacture the component and produce the other product at the same…
Edwards Company has two operating divisions, A and B. The following information is provided for Division A: Unit selling price $158 $108 $ 28 Unit variable costs Unit fixed costs Division B uses the type of product produced by Division A and has approached Division A about buying the product internally. Division B is currently paying $153 to purchase the product from an outside source. If Division A sells internally it can save $14.0 per unit in variable costs. Assuming that Division A has sufficient excess capacity to produce all of the units requested by Division B, which of the following is the lowest price Division A should consider for the transfer? Multiple Choice $94.00 $108.00 $153.00 $144.00
ractor Division makes a part that it sells to customers outside of the company. Data concerning this part appear below: Selling price to outside customers $ 38 Variable cost per unit $ 26 Total fixed costs $ 402,000 Capacity in units 30,500 Assembly Division of the same company would like to use the part manufactured by Tractor Division in one of its products. Assembly Division currently purchases a similar part made by an outside company for $37 per unit and would substitute the part made by Tractor Division. Assembly Division requires 5,020 units of the part each period. Tractor Division has ample excess capacity to handle all of Assembly Division’s needs without any increase in fixed costs and without cutting into outside sales. What is the lowest acceptable transfer price from the standpoint of the selling division? Multiple Choice $34 $38 $26 $37
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 $6.71 • Fixed cost per unit 1.03 • Division B sales price of Component X 14.50
(Appendix 11A) Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below: $40 $30 $10,000 20,000 Selling Price to Outside Customers Variable cost per Unit Total Fixed Costs Capacity in Units Division B of the same company would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made by an outside company for $38 per unit and would substitute the part made by Division A. Division B requires 5,000 units of the part each period. Division A has ample capacity to produce the units for Division B without any increase in fixed costs and without cutting into sales to outside customers. If Division A sells to Division B rather than to outside customers, the variable cost per unit would be $1 lower. What should be the lowest acceptable transfer price from the perspective of Division A? Multiple Choice $40. $30. $29.