2. Refer to the data in case B above. In this case, there will be no savings in variable selling costs on intracompany sales.

a. What is the lowest acceptable transfer price from the perspective of the selling division?

b. What is the highest acceptable transfer price from the perspective of the buying division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make decisions on their own, will a transfer probably take place?

Exercise 11A-3 Transfer Pricing Situations [LO11-5) The following information applies to the questions displayed below.) In each of the cases below, assume Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits. 16,000 96.000 101.000 77.000 Division X: Capacity in units Number of units being sold to outside customers Selling price per unit to outside customers Variable costs per unit Fixed costs per unit (based on capacity) Division Yt Number of units needed for production Purchase price per unit now being paid to an outside supplier Exercise 11A-3 Part 2 2. Refer to the data in case B above. In this case, there will be no savings in variable selling costs on intracompany sales. a. What is the lowest acceptable transfer price from the perspective of the selling division? b. What is the highest acceptable transfer price from the perspective of the buying division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make decisions on their own, will a transfer probably take place? Complete this question by entering your answers in the tabs Dan 4 Dan R Complete this question by entering your answers in the tabs below. Req 2A Req 2B Req 2C What is the lowest acceptable transfer price from the perspective of the selling division? Lowest acceptable transfer price Reg 2A Req 2B > - ONE PIECE Complete this question by entering your answers in the tabs below. Reg 2A Reg 2B Reg 20 What is the highest acceptable transfer price from the perspective of the buying division? Highest acceptable transfer price DRA Reg 2A Reg 28 Reg 2c What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make decisions on their own, will a transfer probably take place? Identify the range of acceptable transfer prices (if any): There is not a range of acceptable transfer prices There is a range of acceptable transfer prices as shown below s Transfer price Are the managers likely to agree on a transfer price? Yes ONO Reg 28