Question
A firm uses negotiated transfer prices to transfer costs from the Seller Department and the Buyer Department. Buyer Department uses a key input from Seller
A firm uses negotiated transfer prices to transfer costs from the Seller Department and the Buyer Department. Buyer Department uses a key input from Seller Department. Buyer Department can buy this good from the external market for $100 per unit. Seller Department assigned the following per unit costs to each unit of producing this input.
Direct materials: $20 per unit
Direct labor: $28 per unit
Variable overhead: $21 per unit
Fixed overhead: $11 per unit
What is the range of negotiation (that is, the difference between the price ceiling and price floor)?
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