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 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. Req 1A A Req 1B Case Req 1C 110,000 110,000 $ 50 $25 $8 24,000 $43 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. B 107,000 83,000 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? $28 $19 $5 24,000 $ 38 What is the lowest acceptable transfer price from the perspective of the selling division? Lowest acceptable transfer price
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 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. Req 1A A Req 1B Case Req 1C 110,000 110,000 $ 50 $25 $8 24,000 $43 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. B 107,000 83,000 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? $28 $19 $5 24,000 $ 38 What is the lowest acceptable transfer price from the perspective of the selling division? Lowest acceptable transfer price
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text: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.
Req 1A
A
Req 1B
Case
Req 1C
110,000
110,000
$50
$25
$ 8
24,000
$43
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.
B
107,000
83,000
$28
$19
$5
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 ansfer prices (if any) between the two divisions? If the managers are free to
decisions on their own, will a transfer probably take place?
24,000
$ 38
What is the lowest acceptable transfer price from the perspective of the selling division?
Lowest acceptable transfer price
gotiate and make
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