Beta Electronics Inc.

Scenario: Transfer Pricing

Product Details:

• Division A (Selling Division):
  • Variable Costs: $200,000
  • Fixed Costs: $100,000
  • Production Capacity: 10,000 units

• Division B (Buying Division):
  • Variable Costs: $150,000
  • Fixed Costs: $80,000
  • Demand: 8,000 units

Requirements:

1. Transfer Pricing Calculation:
   • Determine the transfer price per unit for Division B to acquire products from Division A using the cost-plus pricing method. Present a table showing the calculation of the transfer price and its components.

1. Balance Sheet Presentation:
   • Present the impact of the transfer price on the balance sheet of Beta Electronics Inc. Include the inventory valuation and intercompany accounts affected by the transfer pricing decision.

1. Financial Statement Disclosure:
   • Discuss how the transfer pricing decision is disclosed in Beta Electronics Inc.'s financial statements. Explain the requirements for disclosure under relevant accounting standards.

1. Tax Implications:
   • Analyze the tax implications for Beta Electronics Inc. resulting from the transfer pricing decision. Discuss potential tax strategies and considerations for minimizing tax liabilities.