Chapter 11, Problem 11.20P

1.

To determine

Introduction: The transfer price refers to the price at which the goods and services are exchanged between companies under common control or between divisions of the same company.

The value of the lowest acceptable transfer price for the selling division, the highest acceptable transfer price for the buying division, the range of acceptable transfer price and will the managers voluntarily agree to transfer the units along with the reasons for the same.

2.

To determine

Introduction: The transfer price refers to the price at which the goods and services are exchanged between companies under common control or between divisions of the same company.

To explain: The effect on the profits of the P Division, C division, and the entire company due to the change in the supply price of the P division.

3.

To determine

Introduction: The transfer price refers to the price at which the goods and services are exchanged between companies under common control or between divisions of the same company.

The value of the lowest acceptable transfer price for the selling division, the highest acceptable transfer price for the buying division, the range of acceptable transfer prices and will the managers voluntarily agree to transfer units within the divisions along with the reason for the same.

4.

To determine

Introduction: The transfer price is the price that is charged by one department of the company to another department of the same company for the transfer of goods and services.

The P Division should meet the price of the outside supplier or not.

The effect on the profits of the company as a whole when the P Division does not meet the price of the outside supplier.

5.

To determine

Introduction: The transfer price is the price that is charged by one department of the company to another department of the same company for the transfer of goods and services.

Whether the C Division should purchase from the P Division at a higher price for the good of the company as a whole.

6.

To determine

Introduction: The transfer price is the price that is charged by one department of the company to another department of the same company for the transfer of goods and services.

The effect on the profits of the company as a whole when the C Division is required to purchase 5,000 tons of pulp each year from the P Division at $70 per ton.