Exercise 11-3 (Algo) Transfer Pricing Basics [LO11-3] Sako Companys Audio Division produces a speaker that is used by manufociurets of various audio products: Sales and cost dots on the spesker follow Sako Company has a HI-Fi Oiviston that could use this speaker in one of ins products. The HifH Oivision will need 5,000 speakers per year it has recelved a quote of $61 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional prokits Required: 1 Assume the Audio Division sells only 20.000 speakers per year 10 outside customers a. From the stancpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hirfi Division? b. From the standpotrit of the Hi-Fi Division, whot is the highest occeptable tronsfer price for speakers acouired from the Audio Diviston? c. What is the range of acceptable transfer prices fif any between the wo civisions? iffor free to negotiate without interference, would you expect the division managers to voluntartly agree to the transfer of 5.000 speakers from the Audio Division to the Hifi ONision? d. Fron the standpoint of the entire company, should the transfer take place? 2. Assume the Audio Distion is seiling 22.500 speakers per year to outside customers. a. From the standpoint of the Audio Oivision, what is the lowest occeproble transfer price for speakers sold to the Hifi Division? b. From the standpoint of the HI-Fi Ofvision, what is the highest acceprobet transfer pnce for speakers acquired from the Audion Divion? C. What is the range of acceptable transter prices of ary between the two divisions? if left free to negonate without interference. would you expect the division managers to volumarily agree to the transfer of 5.000 speakers from the Audio Division so the Hifi Division? d. From the standpoint of the entre company. should the transtertake ploce? 3 Assume the Audio Division is selling 25,000 speokeis per year to outside customers. a. From the stondpoint of the Audio Division, what is the lowest acceptable transfer price for speakeis sold to the HifFi Division? b From the standpoint of the Hifi Divition, what is the highest acceptable transfer price for spenkers acquired from the Audio Divisione C. What is the range of acceptable transfer prices if any between the two divisions? if leff free to negotiale without inferterence. would you expect the division managers to voluntorily agree to the tronsfer of 5,000 speakers from the Audio ONision to the HiFi Oivision? d. From the standpoint of the entire company, should the transfer take place? Complete this question by entering vour answers in the tabs below
