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Division Details: Division A (Selling Division): Variable Costs: $500,000 Fixed Costs: $250,000 Production Capacity: 30,000 units Division B (Buying Division): Variable Costs: $400,000 Fixed Costs:
Division Details:
- Division A (Selling Division):
- Variable Costs: $500,000
- Fixed Costs: $250,000
- Production Capacity: 30,000 units
- Division B (Buying Division):
- Variable Costs: $400,000
- Fixed Costs: $200,000
- Demand: 25,000 units
Requirements:
- Determine the transfer price per unit for Division B to acquire products from Division A using the cost-plus method.
- Evaluate the impact on the overall profitability of the company.
- Present the transfer pricing calculations in a table.
- Discuss the benefits and challenges of the chosen transfer pricing method.
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