=+19-27 K General guideline, transfer pricing OBJECTIVES 3, 4, 8 Vision Ltd manufactures and sells television sets. Its Assembly Division (AD) buys television screens from the Screen Division (SD) and assembles the television sets. The SD, which is operating at capacity, incurs an incremental manufacturing cost of $65 per screen. The SD can sell all its output to the outside market at a price of $100 per screen, after incurring a variable marketing and distribution cost of $8 per screen. If the AD purchases screens from outside suppliers at a price of $100 per screen, it will incur a variable purchasing cost of $7 per screen. Vision Ltd’s division managers can act autonomously to maximise their own division’s operating profit.

752 Chapter 19: Management control systems, transfer pricing and multinational considerations M19_HORN3377_02_LT_C19.indd 752 2/09/13 4:05 PM Required 1 What is the minimum transfer price at which the SD manager would be willing to sell screens to the AD?