Domagisko Company's Division 'S' (selling division) produces a small tool used by other companie. part in their products. Cost and sales data related to the small tool are given below: Selling price per unit Variable costs per unit Fixed costs per unit* based on capacity of 40,000 tools per year. P 50 P 30 P 12 The company's Division 'B' (buying division) is introducing a new product that will use the same to the one produced by Division S. An outside supplier has quoted the Division B a price of P 48 Division B would like to purchase the tools from Division S, only if an acceptable transfer pri worked out. REQUIRED: Consider the following independent cases: 1. Division S has ample idle capacity to handle all the Division B's needs: A) What is the minimum transfer price for Division S? B) What is the maximum transfer price for Division B? 2. Division S is presently selling all the tools it can produce to outside customers:
Domagisko Company's Division 'S' (selling division) produces a small tool used by other companie. part in their products. Cost and sales data related to the small tool are given below: Selling price per unit Variable costs per unit Fixed costs per unit* based on capacity of 40,000 tools per year. P 50 P 30 P 12 The company's Division 'B' (buying division) is introducing a new product that will use the same to the one produced by Division S. An outside supplier has quoted the Division B a price of P 48 Division B would like to purchase the tools from Division S, only if an acceptable transfer pri worked out. REQUIRED: Consider the following independent cases: 1. Division S has ample idle capacity to handle all the Division B's needs: A) What is the minimum transfer price for Division S? B) What is the maximum transfer price for Division B? 2. Division S is presently selling all the tools it can produce to outside customers:
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter11: Performance Evaluation And Decentralization
Section: Chapter Questions
Problem 22BEB: Calculating Transfer Price Teslum Inc. has a number of divisions, including the Machina Division, a...
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![7. Transfer Pricing
Domagisko Company's Division 'S' (selling division) produces a small tool used by other companies as a key
part in their products. Cost and sales data related to the small tool are given below:
Selling price per unit
Variable costs per unit
P 50
P 30
Fixed costs per unit*
P 12
based on capacity of 40,000 tools per year.
The company's Division 'B' (buying division) is introducing a new product that will use the same tool such as
the one produced by Division S. An outside supplier has quoted the Division B a price of P 48 per tool.
Division B would like to purchase the tools from Division S, only if an acceptable transfer price can be
worked out.
REQUIRED: Consider the following independent cases:
1. Division S has ample idle capacity to handle all the Division B's needs:
A) What is the minimum transfer price for Division S?
B) What is the maximum transfer price for Division B?
2. Division S is presently selling all the tools it can produce to outside customers:
A) What is the minimum transfer price?
B) Shall the Division B purchase the tools from Division or from the outside supplier? Why?
3. Division S is presently selling 36,000 tools per year to outside customers while Division B requires
10,000 tools per year:
A) What is the minimum transfer price for Division S?
B)
Shall the company make-and-transfer 10,000 tools or buy the tools from the outside supplier?
Why?
Activa
Go to S](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0b9bed71-fd20-49a3-9e11-5fdda8289409%2F3303e9c7-7aef-4f7f-853b-60ce4079f48b%2Fwclznzd_processed.png&w=3840&q=75)
Transcribed Image Text:7. Transfer Pricing
Domagisko Company's Division 'S' (selling division) produces a small tool used by other companies as a key
part in their products. Cost and sales data related to the small tool are given below:
Selling price per unit
Variable costs per unit
P 50
P 30
Fixed costs per unit*
P 12
based on capacity of 40,000 tools per year.
The company's Division 'B' (buying division) is introducing a new product that will use the same tool such as
the one produced by Division S. An outside supplier has quoted the Division B a price of P 48 per tool.
Division B would like to purchase the tools from Division S, only if an acceptable transfer price can be
worked out.
REQUIRED: Consider the following independent cases:
1. Division S has ample idle capacity to handle all the Division B's needs:
A) What is the minimum transfer price for Division S?
B) What is the maximum transfer price for Division B?
2. Division S is presently selling all the tools it can produce to outside customers:
A) What is the minimum transfer price?
B) Shall the Division B purchase the tools from Division or from the outside supplier? Why?
3. Division S is presently selling 36,000 tools per year to outside customers while Division B requires
10,000 tools per year:
A) What is the minimum transfer price for Division S?
B)
Shall the company make-and-transfer 10,000 tools or buy the tools from the outside supplier?
Why?
Activa
Go to S
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