Oscar Industries requires 2,400 units of turntables. The glass and ceramic products division already produces similar turntables
Question:
Oscar Industries requires 2,400 units of turntables. The glass and ceramic products division already produces similar turntables for the external market and sells them at an industry-wide established price of $36. The company, so far, has maintained negotiated transfer-pricing policy across the organization. The glass and ceramic products division has enough excess capacity to produce additional 4,000 units of turntables. Its variable cost of production is $25.
What is the natural bargaining range for a transfer price between the two divisions? Explain why no price below your range would be acceptable. Also explain why no price above your range would be acceptable.
Step by Step Answer:
Introduction To Management Accounting
ISBN: 9781292412566
17th Edition, Global Edition
Authors: Charles Horngren, Gary L Sundem, Dave Burgstahler