[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 106,000 Variable costs per unit Number of units being sold to outside customers Selling price per unit to outside customers 95,000 106,000 72,000 $ 58 $ 26 $ 24 $ 16 Fixed costs per unit (based on capacity) $ 8 $ 4 Division Y: Number of units needed for production 23,000 23,000 Purchase price per unit now being paid to an outside supplier $ 52 $ 32 Exercise 11-13 (Algo) Part 1 Required: 1. Refer to the data in case A above. Assume in this case $2 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? Che
[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 106,000 Variable costs per unit Number of units being sold to outside customers Selling price per unit to outside customers 95,000 106,000 72,000 $ 58 $ 26 $ 24 $ 16 Fixed costs per unit (based on capacity) $ 8 $ 4 Division Y: Number of units needed for production 23,000 23,000 Purchase price per unit now being paid to an outside supplier $ 52 $ 32 Exercise 11-13 (Algo) Part 1 Required: 1. Refer to the data in case A above. Assume in this case $2 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? Che
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:[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
106,000
Variable costs per unit
Number of units being sold to outside customers
Selling price per unit to outside customers
95,000
106,000
72,000
$ 58
$ 26
$ 24
$ 16
Fixed costs per unit (based on capacity)
$ 8
$ 4
Division Y:
Number of units needed for production
23,000
23,000
Purchase price per unit now being paid to an outside
supplier
$ 52
$ 32
Exercise 11-13 (Algo) Part 1
Required:
1. Refer to the data in case A above. Assume in this case $2 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?
Che
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