This paper circulates around the core theme of Assume that $3 per unit in variable selling costs can be avoided on intracompany sales. If the managers are free to negotiate and make decisions on their own, will a transfer take place? together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.
EXERCISE 11A–1 Transfer Pricing Situations [LO5] In each of the cases below, assume that Division… 1 answer below » EXERCISE 11A–1 Transfer Pricing Situations [LO5] In each of the cases below, assume that Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits. View complete question » Division X: Capacity in units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 100,000 Number of units being sold to outside customers . . . . . . 100,000 EXERCISE 11A–1 Transfer Pricing Situations [LO5] In each of the cases below, assume that Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits. Division X: Capacity in units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 100,000 Number of units being sold to outside customers . . . . . . 100,000 80,000 Selling price per unit to outside customers . . . . . . . . . . . $50 $35 Variable costs per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . $30 $20 Fixed costs per unit (based on capacity) . . . . . . . . . . . . . $8 $6 Division Y: Number of units needed for production . . . . . . . . . . . . . . Purchase price per unit now being paid to an outside supplier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 $47 20,000 $34 Required: 1. Refer to the data in case A above. Assume that $3 per unit in variable selling costs can be avoided on intracompany sales. If the managers are free to negotiate and make decisions on their own, will a transfer take place? If so, within what range will the transfer price fall? Explain. 2. Refer to the data in case B above. In this case, there will be no savings in variable selling costs on intracompany sales. If the managers are free to negotiate and make decisions on their own, will a transfer take place? If so, within what range will the transfer price fall? Explain. View less » Dec 07 2015 06:13 PM
