CUCK HERE TO SAVE YOUR WORK D 1 A E H Nelco Company's Electrical Division produces a high quality transformer Sales and cost data on the transformer follow: AC 1 2 a 4 5 6 7 Selling price per unit on the outside market Variable costs per unit Fixed costs per unit (based on capacity) Capacity in units $40 $21 $9 50.000 Nelco Company has a Motor Division that would like to begin purchasing this transformer from the Electrical Division. The Motor Division is currently purchasing 10.000 transformers each year from another company at a cost of $36 per transformer. The supplier gives the Motor Divsion a 5% discount. 9 10 Required: 11 12 1. Assume that the Electrical Division is now selling 50.000 transformers each year to outside customers. Will a transfer take place? a) Calculate the minumum and maximum transfer prites. (3 marks) 15 16 Minimum transfer price from the perspective of the 17 18 Maximum transfer price from the perspective of the ITP V3 answer sheet Now 13 14 puer gives the Motor 9 10 Required: 16 12 1. Assume that the Electrical Division is now selling 50,000 transformers each year to outside customers. Will a transfer take place? 13 14 a) Calculate the minimum and maximum transfer prices. (3 marks) 15 Minimum transfer price from the perspective of the Maximum transfer price from the perspective of the 19 20 b) Are the managers of the two divisions likely to voluntarily agree to a transfer price for 10,000 transformers each year? (1 mark) 21 Transfer: 18 22 23 24 2. Now assume that the Electical Division is currently selling 46,000 transformers to outside customers and there are 52 in variable cost savings on internal sales. NTP V3 answer sheet New A D F H 23 2. Now assume that the Electical Division is currently selling 46,000 transformers to outside customers and there are 52 in variable cost savings on internal sales. 25 26 27 28 a) Calculate the minimum and maximum transfer prices. (3 marks) Supporting calcuations Minimum transfer price Maximum transfer price 30 31 32 33 34 35 36 37 38 9 b) Are the managers of the two divisions likely to voluntarily agree to a transfer price for 10,000 transformers each year? (1 mark) Transfer: TP V3 answer sheet Now