Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

2.00 1.00 19C9.71 Future Industries operates as a decentralized, vertically integrated, multidivisional company. One of its divisions, the systems division, manufactures scientific instruments and uses

image text in transcribed

2.00 1.00 19C9.71 Future Industries operates as a decentralized, vertically integrated, multidivisional company. One of its divisions, the systems division, manufactures scientific instruments and uses the products of two of the other divisions. The board division manufactures printed circuit boards (PCBs). It makes one PCB model exclusively for the systems division using proprietary designs and sells less complex models to outside markets. The transistor division sells its products in a well-developed competitive market and also to the systems division. The costs per unit of the two products the systems division uses are as follows: PCB Transistor Direct material $ 7.50 $1.60 Direct labour 13-50 Variable overhead 6.00 Fixed overhead 2.40 1.50 Total cost $29.40 $6.10 The board division sells its commercial product at total cost plus a 25% markup and believes that the proprietary board it makes for the systems division would sell for $36.75 per unit on the open market. The market price of the transistor used by the systems division is $7.40 per unit. Instructions a. Using the general approach to transfer pricing, determine the minimum transfer price at which the transistor division would sell the transistor to the systems division. b. Determine the maximum transfer price at which the systems division would buy the transistor from the internal division. c. Assume the systems division is able to purchase a large quantity of transistors from an outside source at $5.80 per unit and that the transistor division has excess capacity. Evaluate this price using the criteria of goal congruence and division performance. d. The board and systems divisions have negotiated a transfer price of $33 per printed circuit board. Evaluate this negotiated transfer price in terms of goal congruence, division performance, and division autonomy

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Management Accounting

Authors: Pauline Weetman

2nd Edition

0273718452, 978-0273718451

More Books

Students also viewed these Accounting questions

Question

How to find if any no. is divisble by 4 or not ?

Answered: 1 week ago

Question

Explain the Pascals Law ?

Answered: 1 week ago

Question

What are the objectives of performance appraisal ?

Answered: 1 week ago

Question

What is the purpose of the Occupational Safety and Health Act?

Answered: 1 week ago

Question

Discuss globalization issues for small to medium-sized businesses.

Answered: 1 week ago