Cost Transfer Price

Bon CPAs, linc.

Divishonal Incrme Seatements

For the Year Ended December $31,20$Y$8$

Analysis

Vou are now able to put topether all the information you've collected and analyze the data. In the following table, "Ror" stands for "Return on Investment,"

Complete the follswing tables using the information from the other resulrements and selection lists orvided.

Aedit Devisien

Final Questions

Afer analyaing the data, you are able to antwser Mr$.$ Baileys eusations $(1)-(4)$ that follow.

Given that Mri Baley is evalusting BOR CPMs$.$ InC., which is an imestment center, what transfer pricing option$($s$)$ would he most prefer that the divisions use?

a$.$ No tranafer bebvesen diviaions

b$.$ Morket tronefer price of $$110$ per hour

c$.$ Negotiated tranafer price of $$90$ per haur

d$.$ Varisble standard cost transfer price of $$60$ per hour

Which tranafer prizing aption would the mansger of the Audit Division prefer?

No tranefer between divisiona

b$.$ Morkent trannfer price of $$110$ per hour

c$.$ Nogotiated tranater price of $$30$ per hour

d$.$ Variable xtandard coxt tranafer price of $$60$ per hour

Whid tanafer pricing option would the manager of the Tax Diviaion preler?

a$.$ No tranxfer between divisions

b$.$ Market tranafor price of $$110$ por hour

c$.$ Negotintad tranter price of $no per hour

d$.$ Variable xtandard coxt trenafer price of $$60$ per hour

s

Use the negotiatsd tranter price. so that each entity is botter off than it would be without any trancfers betwosen divisions.

b$.$ If the divisknsl msnsgers cannot come to sn spreement, it's best to forgo any tranefers between divisions in onder to reduce confict within the compsy.