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 and cost data on 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 $ 96 $ 78 5 B 25,000 Sako Company has a HI-F 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 $93 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 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-F1 Division? D. From the standpoint of the HI-FI DIvision, what is the highest acceptable transfer price for speakers acquired from the Audio Division? What is the range of acceptable transfer prices of 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? a 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-F Division? D. From the standpoint of the HI-FI Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division 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? a. 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-F1 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? a From the standpoint of the entire company, should the transfer take place? Complete this question by entering your answers in the tabs below. Ben 1A De and RE pedres S010 to the H-H DI B. From the standpoint of the HI-FI Division, what is the highest acceptable transfer price for speakers acquired from the Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? Iflent free to ste dotate without interfe you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Division to the H-F d. From the standpoint of the entire company, should the transfer take place? Complete this question by entering your answers in the tabs below. Req 1A and 18 Reg 10 Reg 10 Reg 2A and 28 Req 20 Reg 2D Reg 3A and 3B Reg 3C Reg 3D 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 Division? a Lowest acceptable transfer price Highest acceptable transfer price b. Round 11 Req1C) Sud u. IIIUL LUI LIL MUUIU VIVISIUIT, WOL IS UICINOLULU UTICI MILLI OLULIS SU U 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 ir you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to the 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 soid to the Hi-Ft b. From the standpoint of the HI-FI Division, what is the highest acceptable transfer price for speakers acquired from th Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without inte you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to the d. From the standpoint of the entire company, should the transfer take place? Complete this question by entering your answers in the tabs below. Req 1A and 1B Req IC Req 1D Req 2A and 2B Reg 20 Reg 2D Reg 3A and 38 Reg 3C Reg 3D 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? Assume the Audio Division is now selling only 20,000 speakers per year to outside customers. Show less Identify the range of acceptable transfer prices (if any) There is not a range of acceptable transfer prices There is a range of acceptable transfer prices as shown below Transfer price Are the managers likely to agree on a transfer price? Ores No dcceptable transfer prices (if any) between the two divisions? if left free to negotiate without interr you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to the Hi d. From the standpoint of the entire company, should the transfer take place? Complete this question by entering your answers in the tabs below. Reg 1A and 18 Reg 1C Reg 10 Req 2A and 28 Reg 20 Reg 2D Reg 3A and 38 Reg 3C Reg 3D 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? Assume the Audio Division is selling 22,500 speakers per year to outside customers. Identify the range of acceptable transfer prices (if any) There is not a range of acceptable transfer prices There is a range of acceptable transfer prices as shown below Transfer price Are the managers Skely to agree on a transfer price? Yes No Ustomers what is the lowest acceptable transfer price for speakers he standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to nego you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio d. From the standpoint of the entire company, should the transfer take place? Complete this question by entering your answers in the tabs below. Reg 1A and 1B Reg 1c Reg 10 Req 2A and 28 Reg 20 Req 2D Req 3A and 3B Reg 30 Reg 3D 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 Division? b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired fr Division? a. Lowest acceptable transfer price Highest acceptable transfer price b. Division? orice for speakers acquired from the Audio 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? Complete this question by entering your answers in the tabs below. Reg LA and 18 Req 1C Reg 10 Reg 2A and 20 Req 2c Reg 2D Reg 3A and 38 Reg 3C Reg JD 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? Assume the Audio Division is selling 25,000 speakers per year to outside customers. Identify the range of acceptable transfer prices (if any) There is not a range of acceptable transfer prices There is a range of acceptable transfer prices as shown below Transfer price Are the managers likely to agree on a transfer price? Yes NO