Exercise 11-13 (Algo) Transfer Pricing Situations [LO11-3] [The following information applies to the questions displayed below.] In each of the cases below, assume 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 Number of units being sold to outside customers Selling price per unit to outside customers Variable costs per unit Fixed costs per unit (based on capacity) Division Y: Number of units needed for production Purchase price per unit now being paid to an outside supplier Exercise 11-13 (Algo) Part 1 A Case 108,000 108,000 $ 58 $ 22 $7 25,000 $ 52 B 104,000 79,000 $ 30 $ 11 $5 25,000 $ 22 equired: Refer to the data in case A above. Assume in this case that $2 per unit in variable selling costs can be avoided on intracompany ales. . What is the lowest acceptable transfer price from the perspective of the selling division? What is the highest acceptable transfer price from the perspective of the buying division? What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make ecisions on their own, will a transfer probably take place?
Exercise 11-13 (Algo) Transfer Pricing Situations [LO11-3] [The following information applies to the questions displayed below.] In each of the cases below, assume 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 Number of units being sold to outside customers Selling price per unit to outside customers Variable costs per unit Fixed costs per unit (based on capacity) Division Y: Number of units needed for production Purchase price per unit now being paid to an outside supplier Exercise 11-13 (Algo) Part 1 A Case 108,000 108,000 $ 58 $ 22 $7 25,000 $ 52 B 104,000 79,000 $ 30 $ 11 $5 25,000 $ 22 equired: Refer to the data in case A above. Assume in this case that $2 per unit in variable selling costs can be avoided on intracompany ales. . What is the lowest acceptable transfer price from the perspective of the selling division? What is the highest acceptable transfer price from the perspective of the buying division? What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make ecisions on their own, will a transfer probably take place?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
need correct answer for all with working
![Required information
Exercise 11-13 (Algo) Transfer Pricing Situations [LO11-3]
[The following information applies to the questions displayed below.]
In each of the cases below, assume 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
Number of units being sold to outside customers
Selling price per unit to outside customers
Variable costs per unit
Fixed costs per unit (based on capacity)
Division Y:
Number of units needed for production
Purchase price per unit now being paid to an outside
supplier
Exercise 11-13 (Algo) Part 1
Complete this question by entering your answers in the tabs below.
A
Req 1B
Case
Req 1C
108,000 104,000
79,000
$ 30
$ 11
$5
108,000
$ 58
$ 22
$7
25,000
$ 52
Req 1A
What is the lowest acceptable transfer price from the perspective of the selling division?
Lowest acceptable transfer price
B
Required:
1. Refer to the data in case A above. Assume in this case that $2 per unit in variable selling costs can be avoided on intracompany
sales.
a. What is the lowest acceptable transfer price from the perspective of the selling division?
b. What is the highest acceptable transfer price from the perspective of the buying division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make
decisions on their own, will a transfer probably take place?
25,000
$ 22](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff267d921-7e78-4449-ada4-792e90b484ea%2F2f8479a3-1133-4765-8977-d4b18a643270%2F0lfihbo_processed.png&w=3840&q=75)
Transcribed Image Text:Required information
Exercise 11-13 (Algo) Transfer Pricing Situations [LO11-3]
[The following information applies to the questions displayed below.]
In each of the cases below, assume 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
Number of units being sold to outside customers
Selling price per unit to outside customers
Variable costs per unit
Fixed costs per unit (based on capacity)
Division Y:
Number of units needed for production
Purchase price per unit now being paid to an outside
supplier
Exercise 11-13 (Algo) Part 1
Complete this question by entering your answers in the tabs below.
A
Req 1B
Case
Req 1C
108,000 104,000
79,000
$ 30
$ 11
$5
108,000
$ 58
$ 22
$7
25,000
$ 52
Req 1A
What is the lowest acceptable transfer price from the perspective of the selling division?
Lowest acceptable transfer price
B
Required:
1. Refer to the data in case A above. Assume in this case that $2 per unit in variable selling costs can be avoided on intracompany
sales.
a. What is the lowest acceptable transfer price from the perspective of the selling division?
b. What is the highest acceptable transfer price from the perspective of the buying division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make
decisions on their own, will a transfer probably take place?
25,000
$ 22
Transcribed Image Text:Exercise 11-13 (Algo) Part 1
Required:
1. Refer to the data in case A above. Assume in this case that $2 per unit in variable selling costs can be avoided on intracompany
sales.
a. What is the lowest acceptable transfer price from the perspective of the selling division?
b. What is the highest acceptable transfer price from the perspective of the buying division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make
decisions on their own, will a transfer probably take place?
Complete this question by entering your answers in the tabs below.
Req 1A
Req 1C
What is the highest acceptable transfer price from the perspective of the buying division?
Highest acceptable transfer price
Exercise 11-13 (Algo) Part 1
Req 1B
Required:
1. Refer to the data in case A above. Assume in this case that $2 per unit in variable selling costs can be avoided on intracompany
sales.
a. What is the lowest acceptable transfer price from the perspective of the selling division?
b. What is the highest acceptable transfer price from the perspective of the buying division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make
decisions on their own, will a transfer probably take place?
Complete this question by entering your answers in the tabs below.
Req 1A
Req 18
What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and
make decisions on their own, will a transfer probably take place?
Req 1C
Identify the range of acceptable transfer prices (if any):
OThere is not a range of acceptable transfer prices.
There is a range of acceptable transfer prices as shown below:
Transfer price
S
S
Are the managers likely to agree on a transfer price?
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