Chapter 14, Problem 14.6.5P

To determine

(a)

Concept introduction:

In the Transfer Pricing, one unit is transferred from one department to another department. The price of transferred unit is decided through Company's polices. For example: - cost plus margin, fixed price, variable cost etc.

The range of acceptable transfer using the negotiated price approach.

To determine

(b)

Concept introduction:

In the Transfer Pricing, one unit is transferred from one department to another department. The price of transferred unit is decided through Company's polices. For example: - cost plus margin, fixed price, variable cost etc.

The price acceptable as transfer price in case the managers of the two divisions are not agreeing on a transfer price.