Homework Help is Here – Start Your Trial Now!
Business
Accounting
What should the transfer price be and why?

What should the transfer price be and why?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question
100%

What should the transfer price be and why?

The Top Division of C. Can Company manufactures metal tops that are used by other divisions of C. Can Company and that also are sold to external customers. The Hardware Division of C. Can Company has requested the Top Division to supply a certain top, Style H, and the Top Division has computed a proposed transfer price per thousand tops, as follows: Variable cost Fixed cost $195 21 Total cost 216 Profit (to provide normal return on assets employed) Transfer price 40 $256 The Hardware Division is unwilling to accept this transfer price because Style H tops are regularly sold to outside customers for $239 per thousand. The Top Division points out, however, that competition for this top is unusually keen, and that this is why it cannot price the top to external customers so as to earn a normal return. Both divisions are profit centers.
Transcribed Image Text:The Top Division of C. Can Company manufactures metal tops that are used by other divisions of C. Can Company and that also are sold to external customers. The Hardware Division of C. Can Company has requested the Top Division to supply a certain top, Style H, and the Top Division has computed a proposed transfer price per thousand tops, as follows: Variable cost Fixed cost $195 21 Total cost 216 Profit (to provide normal return on assets employed) Transfer price 40 $256 The Hardware Division is unwilling to accept this transfer price because Style H tops are regularly sold to outside customers for $239 per thousand. The Top Division points out, however, that competition for this top is unusually keen, and that this is why it cannot price the top to external customers so as to earn a normal return. Both divisions are profit centers.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Transfer Pricing
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS