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m price ag divis Requirements 1. What is the minimum price at which the airbag division woul 2. Suppose that Watson Motors requires that whenever divisio internally, they must do so at the incremental cost. Evaluate criteria of goal congruence, evaluating division performance preserving division autonomy. 3. If the two divisions were to negotiate a transfer price, what Evaluate this negotiated transfer-pricing policy using the crit

m price ag divis Requirements 1. What is the minimum price at which the airbag division woul 2. Suppose that Watson Motors requires that whenever divisio internally, they must do so at the incremental cost. Evaluate criteria of goal congruence, evaluating division performance preserving division autonomy. 3. If the two divisions were to negotiate a transfer price, what Evaluate this negotiated transfer-pricing policy using the crit

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Watson Motors, Inc., operates as a decentralized multidivision company. The Vadner division of Watson Motors purchases most of its airbags from the airbag division. The airbag division's incremental cost for manufacturing the airbags is $160 per unit. The airbag division is currently working at 80% of capacity. The current market price of the airbags is $200 per unit. Read the requirements. X Requirements Requirement 1. What is the minimum price The minimum price at which the airbag divis 1. 2. What is the minimum price at which the airbag division would sell airbags to the Vadner division? Suppose that Watson Motors requires that whenever divisions with unused capacity sell products internally, they must do so at the incremental cost. Evaluate this transfer-pricing policy using the criteria of goal congruence, evaluating division performance, motivating management effort, and preserving division autonomy. 3. If the two divisions were to negotiate a transfer price, what is the range of possible transfer prices? Evaluate this negotiated transfer-pricing policy using the criteria of goal congruence, evaluating division performance, motivating management effort, and preserving division autonomy. 4. Instead of allowing negotiation, suppose that Watson specifies a hybrid transfer price that "splits the difference" between the minimum and maximum prices from the divisions' standpoint. What would be the resulting transfer price for airbags?
Transcribed Image Text:Watson Motors, Inc., operates as a decentralized multidivision company. The Vadner division of Watson Motors purchases most of its airbags from the airbag division. The airbag division's incremental cost for manufacturing the airbags is $160 per unit. The airbag division is currently working at 80% of capacity. The current market price of the airbags is $200 per unit. Read the requirements. X Requirements Requirement 1. What is the minimum price The minimum price at which the airbag divis 1. 2. What is the minimum price at which the airbag division would sell airbags to the Vadner division? Suppose that Watson Motors requires that whenever divisions with unused capacity sell products internally, they must do so at the incremental cost. Evaluate this transfer-pricing policy using the criteria of goal congruence, evaluating division performance, motivating management effort, and preserving division autonomy. 3. If the two divisions were to negotiate a transfer price, what is the range of possible transfer prices? Evaluate this negotiated transfer-pricing policy using the criteria of goal congruence, evaluating division performance, motivating management effort, and preserving division autonomy. 4. Instead of allowing negotiation, suppose that Watson specifies a hybrid transfer price that "splits the difference" between the minimum and maximum prices from the divisions' standpoint. What would be the resulting transfer price for airbags?
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