Sam's X Division is currently purchasing a part from an outside supplier. The company's Y Division, which has excess capacity, makes and sells this part for external customers at a variable cost of P22 and a selling price of P34. If Y begins sales to X, it (1) will use the general transfer-pricing rule and (2) will be able to reduce variable cost on internal transfers by P2. If sales to outsiders will not be affected, Y would establish a transfer p

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Sam's X Division is currently purchasing a part from an outside supplier. The company's Y Division, which has excess capacity, makes and sells this part for external customers at a variable cost of P22 and a selling price of P34. If Y begins sales to X, it (1) will use the general transfer-pricing rule and (2) will be able to reduce variable cost on internal transfers by P2. If sales to outsiders will not be affected, Y would establish a transfer price of:

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