Pertinent transfer price, perfect and imperfect markets. Mountaineer, Ic., has two divi- sions, A and B, that manufacture expensive bicycles. Division A produces the bicycle frame, and divi- sion B assembles the rest of the bicycle onto the frame. There is a market for both the subassembly and the final product. Each division has been designated as a profit center. The transfer price for the subassembly has been set at the long-run average market price. The following data are available for each division: Selling price for final product $280 Long-run average selling price for intermediate product Incremental cost per unit for completion in division B Incremental cost per unit in division A 160 170 100 The manager of division B has made the following calculation: $280 Selling price for final product Transferred-in cost per unit (market) Incremental cost per unit for completion Contribution (loss) on product $160 170 330 S (50)

Pertinent transfer price, perfect and imperfect markets. Mountaineer, Ic., has two divi- sions, A and B, that manufacture expensive bicycles. Division A produces the bicycle frame, and divi- sion B assembles the rest of the bicycle onto the frame. There is a market for both the subassembly and the final product. Each division has been designated as a profit center. The transfer price for the subassembly has been set at the long-run average market price. The following data are available for each division: Selling price for final product $280 Long-run average selling price for intermediate product Incremental cost per unit for completion in division B Incremental cost per unit in division A 160 170 100 The manager of division B has made the following calculation: $280 Selling price for final product Transferred-in cost per unit (market) Incremental cost per unit for completion Contribution (loss) on product $160 170 330 S (50)

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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Similar questions

C. Highlight ONE (1) advantage and ONE (1) disadvantage of the market-based transfer pricing method.
What is the financial advantage (disadvantage) of further processing the intermediateproduct?
Briefly explain the problems associated with the payback method.
How can we invest in two assets with dissimilar return characteristics?
Describe the process of the Net-Investment Test?
Please answer questions A, B and C. thank you
n 0 1 2 3 4 5 6 7 8 9 10 A -$250 $60 $970 B -$200 $90 $90 $60 $60 Net Cashflow с -$70 $20 $10 $5 -$50 $60 $50 $40 $30 $20 $10 D -$300 $270 $250 -$129 -$20 $120 $40 E -$90 -$100 -$50 $0 $150 $150 $100 $100
Explain the objectives of transfer pricing and describe the advantages anddisadvantages of various transfer pricing alternatives.
How can we invest in multiple assets with dissimilar return characteristics?
Explain the process of Frozen Investment.
What reinvestment rate is built into the NPV calculation? The IRR calculation?
What are the three methods for determining transfer prices?