Transfer Pricing: This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization. To determine: Whether transfers should be made in division B if there is no unused capacity in division A and whether the market price is the correct transfer price.

Question

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Answer 1

Question

Chapter 22, Problem 22.27P

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: Whether transfers should be made in division B if there is no unused capacity in division A and whether the market price is the correct transfer price.

B.

To determine

Whether the 800 units should be transferred to division A and at what transfer price.

C.

To determine

The contribution to the company as a whole if the transfer were made and as a manager whether buying can be done at $110.

D.

To determine

The transfer price that would produce the same operating income for division A for the two options (a) cutting the external price to $156, with the certainty that the sale will rise to 2,000 units and (b) maintaining the external price of $160 for the 1,200 units and transferring the 800 units to division B at a price that would produce the same operating income.

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Answer 2

Question

Chapter 22, Problem 22.27P

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: Whether transfers should be made in division B if there is no unused capacity in division A and whether the market price is the correct transfer price.

B.

To determine

Whether the 800 units should be transferred to division A and at what transfer price.

C.

To determine

The contribution to the company as a whole if the transfer were made and as a manager whether buying can be done at $110.

D.

To determine

The transfer price that would produce the same operating income for division A for the two options (a) cutting the external price to $156, with the certainty that the sale will rise to 2,000 units and (b) maintaining the external price of $160 for the 1,200 units and transferring the 800 units to division B at a price that would produce the same operating income.

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Answer 3

Question

Chapter 22, Problem 22.27P

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: Whether transfers should be made in division B if there is no unused capacity in division A and whether the market price is the correct transfer price.

B.

To determine

Whether the 800 units should be transferred to division A and at what transfer price.

C.

To determine

The contribution to the company as a whole if the transfer were made and as a manager whether buying can be done at $110.

D.

To determine

The transfer price that would produce the same operating income for division A for the two options (a) cutting the external price to $156, with the certainty that the sale will rise to 2,000 units and (b) maintaining the external price of $160 for the 1,200 units and transferring the 800 units to division B at a price that would produce the same operating income.

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Answer 4

Question

Chapter 22, Problem 22.27P

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: Whether transfers should be made in division B if there is no unused capacity in division A and whether the market price is the correct transfer price.

B.

To determine

Whether the 800 units should be transferred to division A and at what transfer price.

C.

To determine

The contribution to the company as a whole if the transfer were made and as a manager whether buying can be done at $110.

D.

To determine

The transfer price that would produce the same operating income for division A for the two options (a) cutting the external price to $156, with the certainty that the sale will rise to 2,000 units and (b) maintaining the external price of $160 for the 1,200 units and transferring the 800 units to division B at a price that would produce the same operating income.

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Answer 5

Chapter 22, Problem 22.27P

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: Whether transfers should be made in division B if there is no unused capacity in division A and whether the market price is the correct transfer price.

B.

To determine

Whether the 800 units should be transferred to division A and at what transfer price.

C.

To determine

The contribution to the company as a whole if the transfer were made and as a manager whether buying can be done at $110.

D.

To determine

The transfer price that would produce the same operating income for division A for the two options (a) cutting the external price to $156, with the certainty that the sale will rise to 2,000 units and (b) maintaining the external price of $160 for the 1,200 units and transferring the 800 units to division B at a price that would produce the same operating income.

Answer 6

Chapter 22, Problem 22.27P

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: Whether transfers should be made in division B if there is no unused capacity in division A and whether the market price is the correct transfer price.

Answer 7

Chapter 22, Problem 22.27P

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: Whether transfers should be made in division B if there is no unused capacity in division A and whether the market price is the correct transfer price.

Answer 8

B.

To determine

Whether the 800 units should be transferred to division A and at what transfer price.

Answer 9

B.

To determine

Whether the 800 units should be transferred to division A and at what transfer price.

Answer 10

C.

To determine

The contribution to the company as a whole if the transfer were made and as a manager whether buying can be done at $110.

Answer 11

C.

To determine

The contribution to the company as a whole if the transfer were made and as a manager whether buying can be done at $110.

Answer 12

D.

To determine

The transfer price that would produce the same operating income for division A for the two options (a) cutting the external price to $156, with the certainty that the sale will rise to 2,000 units and (b) maintaining the external price of $160 for the 1,200 units and transferring the 800 units to division B at a price that would produce the same operating income.

Answer 13

D.

To determine

The transfer price that would produce the same operating income for division A for the two options (a) cutting the external price to $156, with the certainty that the sale will rise to 2,000 units and (b) maintaining the external price of $160 for the 1,200 units and transferring the 800 units to division B at a price that would produce the same operating income.

Answer 14

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Ch. 22 - Prob. 22.1Q Ch. 22 - Describe three criteria you would use to evaluate...Ch. 22 - What is the relationship among motivation, goal...Ch. 22 - Name three benefits and two costs of...Ch. 22 - Organizations typically adopt a consistent...Ch. 22 - Transfer pricing is confined to profit centers. Do...Ch. 22 - What are the three methods for determining...Ch. 22 - What properties should transfer-pricing systems...Ch. 22 - All transfer-pricing methods give the same...Ch. 22 - Prob. 22.10Q

Solution Summary: The author explains how to calculate the contribution margin per unit of A and B.

Whether the 800 units should be transferred to division A and at what transfer price.

The contribution to the company as a whole if the transfer were made and as a manager whether buying can be done at $110.

Chapter 22 Solutions