require: What is the maximum price per wheel that VA should be willing to pay LA if a transfer were to take place? What transfer price would be used according to the transfer pricing formula? Suppose that LA sells 9,000 wheels each month to outside customers. If the transfer pricing formula is used to find the transfer price, what is the appropriate price per wheel?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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require:

What is the maximum price per wheel that VA should be willing to pay LA if a transfer were to take place?
What transfer price would be used according to the transfer pricing formula?
Suppose that LA sells 9,000 wheels each month to outside customers. If the transfer pricing formula is used to find the transfer price, what is the appropriate price per wheel?
LA division and VA division are the only divisions in the National Company. LA makes and sells
wheels which can be either be sold to outside customers or sold to VA. The following data are
available from last month:
LA division:
Selling price per wheel to outside customers
P45
P30
Variable costs per wheel when sold to outside customers
Capacity in wheels
12,000
Wheels sold to outside customers
6,000
VA division:
Number of wheels needed per month
4,000
P42
Price per wheel paid to an outside supplier
Transcribed Image Text:LA division and VA division are the only divisions in the National Company. LA makes and sells wheels which can be either be sold to outside customers or sold to VA. The following data are available from last month: LA division: Selling price per wheel to outside customers P45 P30 Variable costs per wheel when sold to outside customers Capacity in wheels 12,000 Wheels sold to outside customers 6,000 VA division: Number of wheels needed per month 4,000 P42 Price per wheel paid to an outside supplier
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