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e i Exercise 11A-1 Transfer Pricing Basics [L011-5] Sako Company's Audio Divisi the speaker follow on produces a speaker that is used by manufacturers of various audio products. Sales and cost data on Selling price per unit on the intermediate market Variable costs per unit Fixed costs Capacity in units $20 unit (based on capacity) 55,000 Sako year. It has received a quote of $36 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits. The Hi-Fi Division will need 9,000 speakers per 1. Assume the Audio Division is now selling only 46,000 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? eof acceptable transfer prices (if any) between the two divisions? t left free to negotiate without interference, would the Audio Division to the Hi-Fi Division? you expect the division managers to voluntarily agree to the transfer of 9,000 speakers frorm d. From the standpoint of the entire company, should the transfer take place? 2. Assume the Audio Division is selling all of the speakers it can produce to outside customers a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speaker b. From the standpoint of the Division? c what is the range of acceptable transfer prices f any between the two divisions, r iet ee to negotiate without terference ould you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the Hi-Fi Division? s sold to the Hi-Fi Division? Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio d a quste of $36 per speaker from another manufacturer. Sako Company evaluates division managers on the bass TONe O IL products. The Hi-i Division will need 9,000 speakers per i of divisional profits 25 points Required: 1. Assume the Audio Division is now selling only 46,000 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-i 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 t you expect the division managers to voluntarily agree to the transfer of 9,000 speakers the two divisions? it left free to negotiate without interference, would d. From the standpoint of the entire company, should the transfer take place? Assume the Audio Division is selling all of the speakers it can produce 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 9,000 speakers from the Audio Division to the Hi-Fi Division? d. From the standpoint of the entire company, should the transfer take place? 3 Answer is not complete. Complete this question by entering your answers in the tabs below Req 1A Req 18 Req 1C Reg 1D Req 2A Req 2B Req 2C Req 2D From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fl Assume the Audio Division is now selling only 46,000 speakers per year to outside customers. Division? Division C. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interferen you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the Hi-Fi Di d. From the standpoint of the entire company, should the transfer take place? Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 1C Req 1D Req 2A Req 2B Req 2C Req 2D From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? Assume the Audio Division is now selling only 46,000 speakers per year to outside customers s 101,920 Req 1A Req 1B> C. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interfere you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the Hi-Fi d. From the standpoint of the entire company, should the transfer take place? Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1D Req 2A Req 2B Req 2C Req 2D Req 1A Req 1B Req 1C From the standpoint of the Division? Assume the Audio Division is now selling only 46,000 speakers per year to outside customers Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Req 1C > Req 1A Complete this question by entering your answers in the tabs below. Req 1A Req 18 Req 1C Req 2A Req 2BReq 2C Req 2D 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 9,000 speakers from the Audio Division to the Hi-Fi Division? Assume the Audio Division is now selling only 46,000 speakers per year to outside customers Identify the range of acceptable transfer prices (if any) OThere is not a range of acceptable transfer prices OThere is a range of acceptable transfer prices as shown below sTransfer Are the managers likely to agree on a transfer price? OYes ONo unge ul aeeplable transfer prices (if any) between the two divisions? If left free to negotiate without interf you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the Hi d. From the standpoint of the entire company, should the transfer take place? 3 Answer is not complete. Complete this question by entering your answers in the tabs below Req 1A Req 18 Req 1C Req 1D Req 2A Req 28 Req 2C Req 2D From the standpoint of the entire company, should the transfer take place? Assume the Audio Division is now selling 46,000 speakers per year to outside customers. Transter should take place. Transfer should not take place Req 1C Req 2A > b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired LIU DVISIUR, What is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? transfer price for speakers acquired from the Audio olnts Division? c. What is the range of acceptable transfer prices (f any) between the two divisions? If left free to negotate without interference,w you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the HiFi Dvisio d. From the standpoint of the entire company, should the transfer take place? Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1D Req 2A Req 2B Req 2C Reg 2D Req 1A Req 1B Req 1C From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? Assume the Audio Division is selling all of the speakers it can produce to outside customers Req 1D Req 2B> 4 of 4 Next Prav you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Drnsion to the Hip. d. From the standpoint of the entire company, should the transfer take place? What is the range of acceptable transfer prices (if any) between the two divisions? ff left free to negotiate without interfere Answer is not complete. Complete this question by entering your answers in the tabs below Req 1A Req 1B Req 1C Req 1D Req 2A Req 2B Req 2C Req 2D From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? Assume the Audio Division is selling all of the speakers it can produce to outside customers. K Req 2A Req 2C KPrey4 of 4 Next X Answer is not complete. Complete this question by entering your answers in the tabs below Req 1A Req 1B Req 1C Req 1D Req 2A Req 2B Req 2C Req 2D 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 9,000 speakers from the Audi Division to the Hi-Fi Division? Assume the Audio Division is selling all of the speakers it can produce to outside customers Identify the range of acceptable transfer prices (f any) OThere is not a range of acceptable transfer prices There is a range of acceptable transfer prices as shown below: Transfer 2 rice Are the managers likely to agree on a transfer price? Yes ONo Mc Graw Hill 2 X Answer is not complete. Complete this question by entering your answers in the tabs below Req 1A Req 1B Req 1C Req 1D Req 2A Req 2B Req 2C Req 2D 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 9,000 speakers from the Audi Division to the Hi-Fi Division? Assume the Audio Division is selling all of the speakers it can produce to outside customers Identify the range of acceptable transfer prices (f any) OThere is not a range of acceptable transfer prices There is a range of acceptable transfer prices as shown below: Transfer 2 rice Are the managers likely to agree on a transfer price? Yes ONo Mc Graw Hill 2 pcukels 98ld to the H ngliest acceptable transfer price for speakers acquired fro c. What is the range of acceptable transfer prices (f any) between the two divisions? f lef free to negotiate withou you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to d. From the standpoint of the entire company, should the transfer take place? Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1B Req 1CReq 1DReq 2AReq 28 Reg 2CReg 2D Req 1A Assume the Audio Division is selling all of From the standpoint of the entire company, should the transfer take place? speakers it can produce to outside customers Transfer should take place OTransfer should not take place K Req 2C