Required: a. Current output in Production is 25,300 units. Packaging requests an additional 5,960 units to produce a special order. What transfer price would you recommend? b. Suppose Production is operating at full capacity. What transfer price would you recommend? c. Suppose Production is operating at 47,620 units. What transfer price would you recommend? a. Optimal transfer price b. Transfer price c. Transfer price per unit per unit per unit
Required: a. Current output in Production is 25,300 units. Packaging requests an additional 5,960 units to produce a special order. What transfer price would you recommend? b. Suppose Production is operating at full capacity. What transfer price would you recommend? c. Suppose Production is operating at 47,620 units. What transfer price would you recommend? a. Optimal transfer price b. Transfer price c. Transfer price per unit per unit per unit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
100%
![Carol Components operates a Production Division and a Packaging Division. Both divisions are evaluated as profit centers. Packaging
buys components from Production and assembles them for sale. Production sells many components to third parties in addition to
Packaging. Selected data from the two operations follow:
Capacity (units)
Sales pricea
Variable costs b
Fixed costs
Production
50,600
$ 252
$ 108
$ 30,000,000
a For Production, this is the price to third parties.
b
For Packaging, this does not include the transfer price paid to Production.
Packaging
25,300
$ 792
$ 300
$ 18,000,000
Suppose Production is located in Country A with a tax rate of 30 percent and Distribution in Country B with a tax rate of 10 percent. All
other facts remain the same.
a. Optimal transfer price
b. Transfer price
c. Transfer price
Required:
a. Current output in Production is 25,300 units. Packaging requests an additional 5,960 units to produce a special order. What transfer
price would you recommend?
b. Suppose Production is operating at full capacity. What transfer price would you recommend?
c. Suppose Production is operating at 47,620 units. What transfer price would you recommend?
per unit
per unit
per unit](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1aacc468-98e0-4221-9d63-defa9e9d2aee%2Faf91ad05-fee5-4bae-8b99-a69da21019d7%2Fxw36ibn.jpeg&w=3840&q=75)
Transcribed Image Text:Carol Components operates a Production Division and a Packaging Division. Both divisions are evaluated as profit centers. Packaging
buys components from Production and assembles them for sale. Production sells many components to third parties in addition to
Packaging. Selected data from the two operations follow:
Capacity (units)
Sales pricea
Variable costs b
Fixed costs
Production
50,600
$ 252
$ 108
$ 30,000,000
a For Production, this is the price to third parties.
b
For Packaging, this does not include the transfer price paid to Production.
Packaging
25,300
$ 792
$ 300
$ 18,000,000
Suppose Production is located in Country A with a tax rate of 30 percent and Distribution in Country B with a tax rate of 10 percent. All
other facts remain the same.
a. Optimal transfer price
b. Transfer price
c. Transfer price
Required:
a. Current output in Production is 25,300 units. Packaging requests an additional 5,960 units to produce a special order. What transfer
price would you recommend?
b. Suppose Production is operating at full capacity. What transfer price would you recommend?
c. Suppose Production is operating at 47,620 units. What transfer price would you recommend?
per unit
per unit
per unit
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