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5. Transfer pricing. Division A of Daku Corporation likes to purchase product ACE-23 from Division B of the corporation. Division A is currently purchasing 20,000
5. Transfer pricing. Division A of Daku Corporation likes to purchase product ACE-23 from Division B of the corporation. Division A is currently purchasing 20,000 units of ACE-23 from an outside at a unit cost of P50, less a 5% quantity discount. Other relevant information are provided below. Unit sales price on the intermediate market Unit variable cost Fixed costs per unit (based on capacity) Normal capacity P 50 24 12 70,000 Required: Suppose Division A can purchase the 20,000 material ACE-23 from a new supplier for P44, net of discount, what would be your recommendation to Division A, buy from Division B or from a new supplier, and at what price. (In your recommendation, the company's overall should be considered): 1. Assuming, Division B has excess capacity. 2. Assuming Division B has no excess capacity
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