Can you provide the solution for 12.40. Thanks.
mpany with a specia Yless divis whole, should the id the omous glass division me division has limited cap. glass division. To se iction and sales o a contribution of SS decision that the To Supp les atthew approached by the management of a commercial construction company windows at $465 each. From the perspective of Clear Windows as a whol be accepted or rejected? Explain your answer. (e) Assume the same facts as in requirement 2(d). Would an autonomous ala or reject the special order? Why? 3. Independent of requirements 1 and 2, assume that the frame division has lin supply half of the required 200 units of the double-paned window to the glass 200 units to the glass division, the frame division would have to forgo production another product to external customers. These external sales typically yield a con Use the general rule to calculate the transfer price, and explain the likely decis will make about the transfer. 12.40 Basic transfer pricing: manufacturer 12.12 Motor Mobile Enterprises (MME) designs, manufactures and sells speciality motion ca 12.13 use in specific medical robotic equipment. MME has two manufacturing divisions: motor division medical applications division. The motor division produces electric motors, 20 per cent of which are sold to the division of MME. The remainder are sold to outside customers. MME treats both divis centres and allows division managers to choose their sources of sale and supply. Corr that all interdivisional sales and purchases be made at a transfer price based on standa motor division's estimated sales and standard cost data for the year ending 31 Decembe of 100 000 units, are as follows: otion control com to the medicala in divisions as i Corporate policy standard variable cember, based on Sales Variable costs Fixed costs Gross margin Unit sales To the medical applications division $ 500 000 (450 000) (200 000) $(150 000) 20 000 To outside customer $4 000 000 (1 800.000 (600.000 $1 600 000 80 000 The motor division has an opportunity to sell the 20 000 units that it currently sells applications division to a new outside customer at a price of $40 per unit. The medical applic can purchase its requirements from an outside supplier at a price of $45 per unit. Required: 1. Assuming that the motor division wishes to maximise its profits, should the motor division take on customer and drop its sales to the medical applications division? Explain your answer. 2. Assume, instead, that MME permits division managers to negotiate the transfer price. The managers on a tentative transfer price of $40 per unit, to be reduced based on an equal sharing of the act gross margin to the motor division resulting from the sale to the medical applications division of Z. motors at $40 per unit. What would be the actual transfer price? 3. Assume now that the motor division has an opportunity to sell the 20 000 motors that there applications division would buy to the same customers that are buying the other 80 000 motors pret by the motor division. The motor division could sell all 100 000 motors to outside customers at a $50. What actions by each division manager are in the best interests of MME? 4. Under the scenario described in requirement 3, use the general transfer pricing rule to calcul transfer price that the motor division should charge the medical applications division for motors 5. Will the transfer price calculated in requirement 4 result in the most desirable outcome from of MME? Justify your
