Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Bostonian Inc. has a number of divisions, including Delta Division and ListenNow Division. The ListenNow Division manufactures a line of MP3 players. Each year the

Bostonian Inc. has a number of divisions, including Delta Division and ListenNow Division. The ListenNow Division manufactures a line of MP3 players. Each year the ListenNow Division purchases component AZ in order to manufacture the MP3 players. Currently it purchases this component from an outside supplier for $6.50 per component. The manager of the Delta Division has approached the manager of the ListenNow Division about selling component AZ to the ListenNow Division. The full product cost of component AZ is $3.10. The Delta Division can sell all of the components AZ it makes to outside companies for $6.50. The ListenNow Division needs 18,000 component AZs per year; the Delta Division can make up to 60,000 components per year.

Assume that the company policy is that all transfer prices are negotiated by the divisions involved.

Required: A. What is the maximum transfer price? Which division sets it? B. What is the minimum transfer price? Which division sets it? C. If the transfer takes place, what will be the transfer price?

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

Fraud Analytics Strategies And Methods For Detection And Prevention

Authors: Delena D. Spann

1st Edition

111823068X, 978-1118230688

More Books

Students also viewed these Accounting questions

Question

3. Define the attributions we use to explain behavior

Answered: 1 week ago