13. For the following questions (13-18) about transfer pricing, assume the organization is X Co. Division S produces a component that can be sold to outside customers at a fair market price or to Division B at a transfer price. Division B uses the component to produce a finished product it sells to outside customers. Division B can also purchase the component from an outside supplier, Co. O at a fair market price. A transfer pricing system should: a. maximize the transfer price c. maintain common and harmonious goals between the divisions and the entire firm d. none of the above b. minimize the transfer price 14. Division S produces a component that is used by Division B. Division S's unit costs of manufacturing the component are: Direct materials $60; Direct labor $16; Variable overhead $20; Fixed overhead $24 (based on a practical volume of 250,000 components). Division S also incurs these costs: fixed selling & administrative $1,200,000, and variable selling $4/unit. Division S expects to sell only 200,000 components next year. The variable selling expenses are avoidable if the component is sold internally. Division B has been buyir the component from an external supplier for $160 each. It expects use 40,000 units of the component next year. The manager of Division B has offered to buy 40,000 units from Division S for $112 each. The maximum transfer price should be: $120 b. $160 a. c. $96 d. $76 15. Refer to the data in question 14. The minimum transfer price should be: $120 c. $96 b. $100 d. $60 a. a. 16. Refer to question 14. How should a transfer price be determined to achieve goal congruence? Use market price because the selling c. Negotiate a transfer price between the division is operating at full capacity minimum and maximum transfer price b. Use market price because the selling d. There is no transfer price possible in this division is operating with excess capacity case since X Co. would be better off buying the product from an outside supplier