In each of the cases below, assume that 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 Case A B 210,000 210,000 210,000 190,000 ta ta ta $ 61 $ 43 $ 31 $ 30 $ 8 $ 6 $ 20,000 20,000 55 $ 42 Required: 1-a. Refer to the data in case A above. Assume that $3 per unit in variable selling costs can be avoided on intracompany sales. Determine the transfer price of the selling division. Transfer price $ 58 < Prev 4 of 7 Next >
In each of the cases below, assume that 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 Case A B 210,000 210,000 210,000 190,000 ta ta ta $ 61 $ 43 $ 31 $ 30 $ 8 $ 6 $ 20,000 20,000 55 $ 42 Required: 1-a. Refer to the data in case A above. Assume that $3 per unit in variable selling costs can be avoided on intracompany sales. Determine the transfer price of the selling division. Transfer price $ 58 < Prev 4 of 7 Next >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
ni.3
Transcribed Image Text:In each of the cases below, assume that 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
Case
A
B
210,000
210,000
210,000 190,000
ta ta ta
$
61 $
43
$
31
$
30
$
8 $
6
$
20,000 20,000
55 $
42
Required:
1-a. Refer to the data in case A above. Assume that $3 per unit in variable selling costs can be avoided on intracompany sales.
Determine the transfer price of the selling division.
Transfer price
$ 58
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