Exercise 15-27 (Algo) Evaluate Transfer Pricing System (LO 15-2)Lola Metals has two decentralized divisions, Stamping and Finishing. Finishing always has purchased certain units from Stamping at$48 per unit. Stamping plans to raise the price to $60 per unit, the price it receives from outside customers. As a result, Finishing isconsidering buying these units from outside suppliers for $48 per unit. Corporate policy allows division managers to choose bothcustomers and suppliers regardless of the transfer price. Stamping's costs follow:Variable costs per unitAnnual fixed costsAnnual production of these units sold to AlphaRequired:a. If Finishing buys from an outside supplier, the facilities that Stamping uses to produce these units will remain idle. What will be theimpact on corporate profits if Lola Metals enforces a transfer price of $60 per unit between Stamping and Finishing?b. Suppose Lola Metals enforces a transfer price of $48 and insists that Stamping sell to Finishing before selling to outside customers.Stamping currently operates at capacity and can easily sell on the outside market the units it sells to Finishing. What cost will LolaMetals incur as a result of this policy?Required A Required BComplete this question by entering your answers in the tabs below.$ 46$ 62,400Cost29,400 unitsSuppose Lola Metals enforces a transfer price of $48 and insists that Stamping sell to Finishing before selling tooutside customers. Stamping currently operates at capacity and can easily sell on the outside market the units itsells to Finishing. What cost will Lola Metals incur as a result of this policy?< Required ARequired B> Exercise 15-27 (Algo) Evaluate Transfer Pricing System (LO 15-2)Lola Metals has two decentralized divisions, Stamping and Finishing. Finishing always has purchased certain units from Stamping at$48 per unit. Stamping plans to raise the price to $60 per unit, the price it receives from outside customers. As a result, Finishing isconsidering buying these units from outside suppliers for $48 per unit. Corporate policy allows division managers to choose bothcustomers and suppliers regardless of the transfer price. Stamping's costs follow:Variable costs per unitAnnual fixed costs.Annual production of these units sold to AlphaRequired:a. If Finishing buys from an outside supplier, the facilities that Stamping uses to produce these units will remain idle. What will be theimpact on corporate profits if Lola Metals enforces a transfer price of $60 per unit between Stamping and Finishing?b. Suppose Lola Metals enforces a transfer price of $48 and insists that Stamping sell to Finishing before selling to outside customers.Stamping currently operates at capacity and can easily sell on the outside market the units it sells to Finishing. What cost will LolaMetals incur as a result of this policy?$ 46$ 62,40029,400 unitsComplete this question by entering your answers in the tabs below.Required A Required BIf Finishing buys from an outside supplier, the facilities that Stamping uses to produce these units will remainidle. What will be the impact on corporate profits if Lola Metals enforces a transfer price of $60 per unit betweenStamping and Finishing?Lola Metal's contribution margin would

Transfer pricing refers to the prices of goods and services that are exchanged between companies…

Exercise 15-27 (Algo) Evaluate Transfer Pricing System (LO 15-2) Lola Metals has two decentralized divisions, Stamping and Finishing. Finishing always has purchased certain units from Stamping at $48 per unit. Stamping plans to raise the price to $60 per unit, the price it receives from outside customers. As a result, Finishing is considering buying these units from outside suppliers for $48 per unit. Corporate policy allows division managers to choose both customers and suppliers regardless of the transfer price. Stamping's costs follow: Variable costs per unit Annual fixed costs Annual production of these units sold to Alpha Required: a. If Finishing buys from an outside supplier, the facilities that Stamping uses to produce these units will remain idle. What will be the impact on corporate profits if Lola Metals enforces a transfer price of $60 per unit between Stamping and Finishing? b. Suppose Lola Metals enforces a transfer price of $48 and insists that Stamping sell to Finishing before selling to outside customers. Stamping currently operates at capacity and can easily sell on the outside market the units it sells to Finishing. What cost will Lola Metals incur as a result of this policy? Complete this question by entering your answers in the tabs below. Required A Required B $ 46 $ 62,400 29,400 units Suppose Lola Metals enforces a transfer price of $48 and insists that Stamping sell to Finishing before selling to outside customers. Stamping currently operates at capacity and can easily sell on the outside market the units it sells to Finishing. What cost will Lola Metals incur as a result of this policy? Cost < Required A Required B

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q