Bollozos Afterlife Corporation's Division A manufactures and sells product Brand X, which is used in refrigeration systems. Per-unit variable manufacturing and selling costs amount to P20 and P5, respectively. The Division can sell this item to external domestic customers for P36 or, alternatively, transfer the product to the company's Division B. Division B is currently purchasing a similar unit from Taiwan for P33. Assume use of the general transfer-pricing rule. • What is the most that the Division B would be willing to pay the Division A for one unit? If Division A had excess capacity, what transfer price would the Division's management set? • If Division A had no excess capacity, what transfer price would the Division's management set? If Division A had no excess capacity, what transfer price would the Division's management set assuming that Division A was able to reduce the variable cost of internal transfers by P4 per unit
Bollozos Afterlife Corporation's Division A manufactures and sells product Brand X, which is used in refrigeration systems. Per-unit variable manufacturing and selling costs amount to P20 and P5, respectively. The Division can sell this item to external domestic customers for P36 or, alternatively, transfer the product to the company's Division B. Division B is currently purchasing a similar unit from Taiwan for P33. Assume use of the general transfer-pricing rule. • What is the most that the Division B would be willing to pay the Division A for one unit? If Division A had excess capacity, what transfer price would the Division's management set? • If Division A had no excess capacity, what transfer price would the Division's management set? If Division A had no excess capacity, what transfer price would the Division's management set assuming that Division A was able to reduce the variable cost of internal transfers by P4 per unit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![Bollozos Afterlife Corporation's Division A manufactures and sells product Brand X,
which is used in refrigeration systems. Per-unit variable manufacturing and selling costs
amount to P20 and P5, respectively The Division can sell this item to external domestic
customers for P36 or, alternatively, transfer the product to the company's Division B.
Division B is currently purchasing a similar unit from Taiwan for P33. Assume use of the
general transfer-pricing rule.
•What is the most that the Division B would be willing to pay the Division A for one unit?
• If Division A had excess capacity, what transfer price would the Division's management
set?
· If Division A had no excess capacity, what transfer price would the Divisions
management set?
If Division A had no excess capacity, what transfer price would the Divisions
management set assuming that Division A was able to reduce the variable cost of
internal transfers by P4 per unit](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc30f8d5b-f652-4f8f-a503-7e3e3f3028c2%2Feebf24f1-f36c-4855-bb76-44f357704c5f%2F8yh5aot_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Bollozos Afterlife Corporation's Division A manufactures and sells product Brand X,
which is used in refrigeration systems. Per-unit variable manufacturing and selling costs
amount to P20 and P5, respectively The Division can sell this item to external domestic
customers for P36 or, alternatively, transfer the product to the company's Division B.
Division B is currently purchasing a similar unit from Taiwan for P33. Assume use of the
general transfer-pricing rule.
•What is the most that the Division B would be willing to pay the Division A for one unit?
• If Division A had excess capacity, what transfer price would the Division's management
set?
· If Division A had no excess capacity, what transfer price would the Divisions
management set?
If Division A had no excess capacity, what transfer price would the Divisions
management set assuming that Division A was able to reduce the variable cost of
internal transfers by P4 per unit
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