Lamothe Solutions is a management consulting firm. Its Business Division advises firms on the adoption and use of financial systems. Civic Division consults with state and local governments. Civic Division has a client that is interested in implementing a new costing system in its public works department. The division’s head approached the head of Business Division about using one of its associates. Corporate Division charges clients $810 per hour for associate services, the same rate other consulting companies charge. The Civic Division head complained that it could hire its own associate at an estimated variable cost of $410 per hour, which is what Business pays its associates.Suppose that Civic Division will charge the client interested in implementing a costing system by the hour based on cost plus a fixed fee, where the cost is primarily the consultant’s hourly pay. Assume also that Civic Division cannot hire additional consultants. That is, if it is to do this job, it will need to use a consultant from Business Division.Required:a-1. What is the minimum transfer price that Business Division should obtain for its services, assuming that it is operating at capacity?a-2. Would this be an ethical price to charge the government client?b-1. What is the transfer price you would recommend if Corporate Division was not operating at capacity?b-2. Would this be an ethical price to charge the government client?**Complete this question by entering your answers in the tabs below.**| | | | ||----------|----------|----------|----------|| **Req A1** | **Req A2** | **Req B1** | **Req B2** |**What is the minimum transfer price that Business Division should obtain for its services, assuming that it is operating at capacity?**Minimum transfer price for Business Division [________] per hour**Navigation buttons: Req A1 < [Req A2](#) >**

Introduction:- Transfer pricing refers to determine the price for the transactions between two or…

Answered: Required: a-1. What is the minimum…

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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Management of Great Springs Bottled Water Company has asked you, the controller, to develop a transfer pricing system for the company. The Transportation Department of the company sells all of its product to the Bottling Department of the company. Thus the Transportation Department's sales become the Bottling Department's cost of goods sold. In order to determine an optimal transfer pricing system, management would like you to demonstrate what an income statement would look like under a cost, market, and negotiated transfer pricing structure. These various transfer prices are listed below. Cost-based $0.61 Market-based $0.73 Negotiated $0.70 Gallons transferred 279,000 Prepare an income statement for each of the transfer prices by filling in the missing numbers in the provided income statement based on each transfer price and calculate the operating income/loss percentage. Round your answers to the nearest whole number. Great Springs Bottled Water CompanyIncome Statement…
Management of Great Springs Bottled Water Company has asked you, the controller, to develop a transfer pricing system for the company. The Transportation Department of the company sells all of its product to the Bottling Department of the company. Thus the Transportation Department's sales become the Bottling Department's cost of goods sold. In order to determine an optimal transfer pricing system, management would like you to demonstrate what an income statement would look like under a cost, market, and negotiated transfer pricing structure. These various transfer prices are listed below. Cost-based $0.61 Market-based $0.74 Negotiated $0.70 Gallons transferred 279,000 Prepare an income statement for each of the transfer prices by filling in the missing numbers in the provided income statement based on each transfer price and calculate the operating income/loss percentage. Round your answers to the nearest whole number. Great Springs Bottled Water CompanyIncome Statement…
The Fruity Bakers specialize in making delicious cakes. Their trademark fruit cake is made in Division X (the supplying division) and sold to external customers for them to decorate, or it can be enjoyed plain. It is also transferred to Division Y (the receiving division) where it is iced and decorated to be sold as a luxury wedding cake. Fruity Bakers are currently trying to decide what the optimum price to sell the cakes from Division X to Y should be in order to motivate the managers of both divisions. The following data shows the costs incurred by Division X to make a fruit cake and by Division Y to ice and decorate the wedding cake: $/unit Division X Variable costs 22 Fixed overhead 9 31 Division Y Variable costs 33 Fixed overhead 8. 41 Plain fruit cakes can be sold and purchased externally for $35. Wedding cakes can be sold for $80. Instructions: 1. Should the company make the fruit cakes internally or buy them in? 2. What non-financial factors should also be taken into…
1. why companies need to transfer price and advantages? 2. explain the transfer pricing method that is used / can be used in this company. Explain the advantages and disadvantages?
Among the best things to do to maintain firm value is to: a. Improve sales at all costs b. Spend as much as possible on public relations and marketing C. Economize on employee training programs d. In so far as possible, make costs reactive to sales e. Wait until the last moment to pay bills
Under what pricing conditions is transfer pricing considered to be legal? Examine the consequences of transfer pricing within the automobile industry. What strategies can international companies implement to manage these consequences?
Under the negotiated transfer pricing approach, the minimum transfer price is established by the purchasing division corporate negotiator corporate headquarters management selling division
Which of the following statements is not correct regarding Local Plus? - Local Plus is especially suited to middle management who show willingness to relocate. - Local Plus is a hybrid version of the balance sheet (home-based) and going rate (host-based) approaches. - Local Plus is used for long-term assignments. - Local plus is the driving force behind cost savings in international assignments. - Local plus is especially suited for temporary transfers.
Which of the followings is NOT an advantage of financial institutions in consumption smoothing? A. They help to solve moral hazard and adverse selection issues. B. They help to share risks. C. They help to reduce transaction costs. D. They help to create more jobs.
1. A. Accounting cost theory B. Diffusion theory C. Transaction cost theory D. Agency theory 2. The theory concerning the cost of managing and supervising a firm is called is when firms seek to economize on transaction costs. A. Accounting cost theory B. Diffusion theory C. Transaction cost theory D. Agency theory 3. The most common reason for failure of large projects is due to A. Organizational and political resistance B. Uncertainty C. Inability to acquire resources D. Culture and routine 4. Which of the following is NOT one of Porter's competitive forces A. Customers B. Suppliers C. New market entrants D. Interest rates 5. Which of the following is NOT a strategy for dealing with Porter's competitive forces? A. Traditional competitors B. Low cost leadership C. Focus on market niche D. Product differentiation
Hi, I also need help finding the lowest acceptable transfer price as well as the highest acceptable transfer price. thanks

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