from one division to the other? a. P50 b. P45 c. P20 d. P35 2. Assume that next month’s costs and levels of operations in the Computer and Computer Chip Divisions are similar to this month. What is the maximum of the transfer price range for a possible transfer of the chip from one division to the other? a. P50 b. P45 c. P35 d. P30 3. Two possible transfer prices (for 4,000 units) are under consideration by the two divisions: P35 and P40. Corporate profits would be ___________ if P35 is selected as the transfer price rather than P40. a. P20,000 larger b. P40,000 larger c. P20,000 smaller d. the same
Office Products Inc. manufactures and sells various high-tech office automation products. Two divisions of Office Products Inc. are the Computer Chip Division and the Computer Division. The Computer Chip Division manufactures one product, a “super chip,” that can be used by both the Computer Division and other external customers. The following information is available on this month’s operations in the Computer Chip Division:
Selling price per chip P50 Monthly capacity 10,000 chips
Variable costs per chip P20 External sales 6,000 chips
Fixed production costs P60,000 Internal sales 0 chips
Fixed SG&A costs P90,000
Presently the Computer Division purchases no chips from the Computer Chips Division, but instead pays P45 to an external supplier for the 4,000 chips it needs each month.
1. Assume that next month’s costs and levels of operations in the Computer and Computer Chip Divisions are similar to this month. What is the minimum of the transfer price range for a possible transfer of the super chip from one division to the other?
a. P50 b. P45 c. P20 d. P35
2. Assume that next month’s costs and levels of operations in the Computer and Computer Chip Divisions are similar to this month. What is the maximum of the transfer price range for a possible transfer of the chip from one division to the other?
a. P50 b. P45 c. P35 d. P30
3. Two possible transfer prices (for 4,000 units) are under consideration by the two divisions: P35 and P40. Corporate profits would be ___________ if P35 is selected as the transfer price rather than P40.
a. P20,000 larger b. P40,000 larger c. P20,000 smaller d. the same
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