Question-->Suppose Going Places has set a transfer price policy of variable cost plus 60 percent for all related-party transactions. Determine how much each party will benefit from the internal transfer? Info Given-->Going Places, Inc., manufactures a variety of luggage for airline passengers. The company has several luggage production divisions, including the Suitable Cases Division, as well as a wholly owned
Question-->Suppose Going Places has set a transfer price policy of variable cost plus 60 percent for all related-party transactions. Determine how much each party will benefit from the internal transfer?
Info Given-->Going Places, Inc., manufactures a variety of luggage for airline passengers. The company has several luggage production divisions, including the Suitable Cases Division, as well as a wholly owned subsidiary, It's Mine, that manufactures small identification tags used on luggage. Each piece of luggage that Suitable Cases produces has two identification tags for which it previously paid the going market price of $2 each. Financial information for Suitable Cases and It's Mine follows:
Sales Suitable Cases It's Mine
4,500 bags × $150.00 each $675,000
200,000 tags × $2.00 each $400,000
Variable expenses
4,500 bags × $85.00 each 382,500
200,000 tags × $0.50 each 100,000
It's Mine has a production capacity of 250,000 tags.
| Suitable Cases Division | ? |
| It's Mine | ? |
I found the mutually beneficial price be $1.25 if that means anything but I got that requirement correct.
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