Exercise 11-3 (Algo) Transfer Pricing Basics [LO11-3] Sako Company's Audio Division produces a speaker that is used by manufacturers of various audio products. Sales a the speaker follow: Selling price per unit on the intermediate market Variable costs per unit Fixed costs per unit (based on capacity) Capacity in units $ 116 $ 98 $8 25,000 Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 5,C year. It has received a quote of $113 per speaker from another manufacturer. Sako Company evaluates division mana of divisional profits. Required: 1. Assume the Audio Division sells only 20,000 speakers per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the H b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to d. From the standpoint of the entire company, should the transfer take place? 2. Assume the Audio Division is selling 22,500 speakers per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired fro Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate witho you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to d. From the standpoint of the entire company, should the transfer take place? 3. Assume the Audio Division is selling 25,000 speakers per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the - b. From the standpoint of the Hi-Fi Division. what is the highest acceptable transfer price for speakers acquired fr
Exercise 11-3 (Algo) Transfer Pricing Basics [LOT1-3] Sako Company's Audio Division produces a speaker that is used by manufacturers of various audio products. Sales the speaker follow: Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 5 , year. It has received a quote of $113 per speaker from another manufacturer. Sako Company evaluates division man of divisional profits. Required: 1. Assume the Audio Division sells only 20,000 speakers per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired fro Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate withou you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to d. From the standpoint of the entire company, should the transfer take place? 2. Assume the Audio Division is selling 22,500 speakers per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the b. From the standpoint of the Hi-FI Division, what is the highest acceptable transfer price for speakers acquired fr Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate witho you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division t d. From the standpoint of the entire company, should the transfer take place? 3. Assume the Audio Division is selling 25,000 speakers per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to th b. From the standooint of the Hi-Fi Division what is the hiohest accentable transfer orice for sneakers acouired Sako Company's Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow: Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 5,000 speakers per year. It has received a quote of $113 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits. Required: 1. Assume the Audio Division sells only 20,000 speake. per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the HI-Fi Division? b. From the standpoint of the Hi.FiDivision, what is the highest acceptable transfer price for speakers acquired from the Audio Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to the Hi.Fi Division? d. From the standpoint of the entire company, should the transfer take place? 2. Assume the Audio Division is selling 22,500 speakers per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? c. What is the range of acceptable transfer prices (ff any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to the Hi-Fi Division? d. From the standpoint of the entire company, should the transfer take place? 3. Assume the Audio Division is selling 25,000 speakers per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? h. From the standooint of the Hi.Fi Division what is the hiohest acceotable transfer price for soeakers acouired from the Audin 3. Assume the Audio Division is selling 25,000 speakers per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? b. From the standpoint of the Hi-FI Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to the Hi-Fi Division? d. From the standpoint of the entife company, should the transfer take place? Complete this question by entering your answers in the tabs below. Assume the Audio Division sells only 20,000 speakers per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-FI Division? b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Dlvision
