Transfer Pricing:
Transfer pricing policy is used where the division are profit or investment centers and there are interdepartmental transfer of goods produced. It is under this situation, the division mangers involved shall decide on the mutually agreed transfer price of the goods.
The transfer price set is in the minimum and maximum range of prices. The minimum transfer price is price at which the selling division is ready to transfer the goods and maximum price is the price at which the buying division is ready to purchase the goods.
Requirement1:
The Contribution earned by the Greco Company shall be determined.
Requirement2:
The Contribution of the company when the transfer has been made.
Requirement3:
The Contribution of the company when the transfer has been made.
Requirement4:
The Recommendation for the company for the alternative to choose.
Requirement5:
The transfer price among the two divisions must be determined when having excess capacity in Cushion division.
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Horngren's Accounting (11th Edition)
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