Calculating Transfer Price Burt Inc. has a number of divisions, including the Indian Division, a producer of liquid pumps, and Maple Division, a manufacturer of boat engines. Indian Division produces the h20-model pump that can be used by Maple Division in the production of motors that regulate the raising and lowering of the boat engine's stern drive unit. The market price of the h20-model is $704, and the full cost of the h20-model is $540. Required: 1. If Burt has a transfer pricing policy that requires transfer at full cost: What will the transfer price be? 540 Do you suppose that Indian and Maple divisions will choose to transfer at that price? Maple Division chooses to transfer Indian Division refuses to transfer 2. If Burt has a transfer pricing policy that requires transfer at market price: What would the transfer price be? 704 Do you suppose that Indian and Maple divisions would choose to transfer at that price? Maple Division chooses to transfer Indian Division chooses to transfer 3. Now suppose that Burt allows negotiated transfer pricing and that Indian Division can avoid $120 of selling expense by selling to Maple Division. Which division sets the minimum transfer price? Indian Division What is the minimum transfer price? 584 Which division sets the maximum transfer price? Maple Division What is the maximum transfer price? Indian Division refuses to transfer 2. If Burt has a transfer pricing policy that requires transfer at market price: What would the transfer price be? 704 Do you suppose that Indian and Maple divisions would choose to transfer at that price? Maple Division chooses to transfer Indian Division chooses to transfer 3. Now suppose that Burt allows negotiated transfer pricing and that Indian Division can avoid $120 of selling expense by selling to Maple Division. Which division sets the minimum transfer price? Indian Division What is the minimum transfer price? 584 Which division sets the maximum transfer price? Maple Division What is the maximum transfer price? 584 Do you suppose that Indian and Maple divisions would choose to transfer somewhere in the bargaining range? Yes Feedback Check My Work 1. Consider the effect on both companies at the transfer price. 2. Consider the effect on both companies at the transfer price. Market price would be the price sold on the outside market. 3. The selling division sets the minimum price and the buying division sets the maximum price