Required information [The following information applies to the questions displayed below.] In each of the cases below, assume Division X has a product that can be sold to outside customers or to Division Y of the same company. The managers of the divisions are evaluated based on their divisional profits. Case A B Division X: Capacity in units 200,000 200,000 Number of units being sold to outside customers 200,000 160,000 Selling price per unit to outside customers $ 90 $ 75 Variable costs per unit $ 70 $ 60 Fixed costs per unit (based on capacity) $ 13 $ 8 Division Y: Number of units needed for production 40,000 40,000 Purchase price per unit now being paid to an outside supplier $ 86 $ 74 Required: 1. Refer to the data in case A above. Assume in this case $3 per unit in variable selling costs can be avoided on intracompany sales. a. What is the lowest acceptable transfer price from the perspective of the selling division? b. What is the highest acceptable transfer price from the perspective of the buying division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make decisions on their own, will a transfer probably take place? Complete this question by entering your answers in the tabs below. Required Required Required 1A 1B 1C What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make decisions on their own, will a transfer probably take place? Identify the range of acceptable transfer prices (if any): There is not a range of acceptable transfer prices. There is a range of acceptable transfer prices as shown below: Show less Transfer price S 4 Are the managers likely to agree on a transfer price? OYes No
Required information [The following information applies to the questions displayed below.] In each of the cases below, assume Division X has a product that can be sold to outside customers or to Division Y of the same company. The managers of the divisions are evaluated based on their divisional profits. Case A B Division X: Capacity in units 200,000 200,000 Number of units being sold to outside customers 200,000 160,000 Selling price per unit to outside customers $ 90 $ 75 Variable costs per unit $ 70 $ 60 Fixed costs per unit (based on capacity) $ 13 $ 8 Division Y: Number of units needed for production 40,000 40,000 Purchase price per unit now being paid to an outside supplier $ 86 $ 74 Required: 1. Refer to the data in case A above. Assume in this case $3 per unit in variable selling costs can be avoided on intracompany sales. a. What is the lowest acceptable transfer price from the perspective of the selling division? b. What is the highest acceptable transfer price from the perspective of the buying division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make decisions on their own, will a transfer probably take place? Complete this question by entering your answers in the tabs below. Required Required Required 1A 1B 1C What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make decisions on their own, will a transfer probably take place? Identify the range of acceptable transfer prices (if any): There is not a range of acceptable transfer prices. There is a range of acceptable transfer prices as shown below: Show less Transfer price S 4 Are the managers likely to agree on a transfer price? OYes No
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Required information
[The following information applies to the questions displayed below.]
In each of the cases below, assume Division X has a product that can be sold to outside customers or to
Division Y of the same company. The managers of the divisions are evaluated based on their divisional
profits.
Case
A
B
Division X:
Capacity in units
200,000 200,000
Number of units being sold to
outside customers
200,000 160,000
Selling price per unit to outside
customers
$ 90
$ 75
Variable costs per unit
$ 70
$ 60
Fixed costs per unit (based on
capacity)
$ 13
$ 8
Division Y:
Number of units needed for
production
40,000
40,000
Purchase price per unit now being
paid to an outside supplier
$ 86
$ 74
Required:
1. Refer to the data in case A above. Assume in this case $3 per unit in variable selling costs can be avoided on
intracompany sales.
a. What is the lowest acceptable transfer price from the perspective of the selling division?
b. What is the highest acceptable transfer price from the perspective of the buying division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to
negotiate and make decisions on their own, will a transfer probably take place?
Complete this question by entering your answers in the tabs below.
Required Required Required
1A
1B
1C
What is the range of acceptable transfer prices (if any) between the two divisions? If the
managers are free to negotiate and make decisions on their own, will a transfer probably
take place?
Identify the range of acceptable transfer prices (if
any):
There is not a range of acceptable transfer prices.
There is a range of acceptable transfer prices as
shown below:
Show less▲
S
Transfer
price
4
Are the managers likely to agree on a transfer price?
O Yes
No](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdb393258-76b9-4b52-89cc-0941c3abc8ef%2F5aad7099-38c6-42c6-849c-5ec865b59a46%2Fg8kvda9_processed.png&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
In each of the cases below, assume Division X has a product that can be sold to outside customers or to
Division Y of the same company. The managers of the divisions are evaluated based on their divisional
profits.
Case
A
B
Division X:
Capacity in units
200,000 200,000
Number of units being sold to
outside customers
200,000 160,000
Selling price per unit to outside
customers
$ 90
$ 75
Variable costs per unit
$ 70
$ 60
Fixed costs per unit (based on
capacity)
$ 13
$ 8
Division Y:
Number of units needed for
production
40,000
40,000
Purchase price per unit now being
paid to an outside supplier
$ 86
$ 74
Required:
1. Refer to the data in case A above. Assume in this case $3 per unit in variable selling costs can be avoided on
intracompany sales.
a. What is the lowest acceptable transfer price from the perspective of the selling division?
b. What is the highest acceptable transfer price from the perspective of the buying division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to
negotiate and make decisions on their own, will a transfer probably take place?
Complete this question by entering your answers in the tabs below.
Required Required Required
1A
1B
1C
What is the range of acceptable transfer prices (if any) between the two divisions? If the
managers are free to negotiate and make decisions on their own, will a transfer probably
take place?
Identify the range of acceptable transfer prices (if
any):
There is not a range of acceptable transfer prices.
There is a range of acceptable transfer prices as
shown below:
Show less▲
S
Transfer
price
4
Are the managers likely to agree on a transfer price?
O Yes
No
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