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6 Required Information Exercise 11-13 (Algo) Transfer Pricing Situations [LO11-3] [The following information applies to the questions displayed below.] 1.71 point In each of the cases below, assume Division X has a product that can be sold either to outside customers or to Division Y Skipped of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits. Case Division X: 2Book Capacity in units 93, 000 101, 000 Number of units being sold to outside customers 93, 000 82, 090 Selling price per unit to outside customers $ 60 $ 34 Variable costs per unit 21 $ 16 References Fixed costs per unit (based on capacity) $ 5 Division Y: Number of units needed for production 19,060 19, 000 Purchase price per unit now being paid to an outside supplier 6 55 5 32 Exercise 11-13 (Algo) Part 1 Required: . Refer to the data In case A above. Assume in this case that $3 per unit in variable selling costs can be avoided on intracompany sales. a. What is the lowest acceptable transfer price from the perspective of the selling division? b. What is the highest acceptable transfer price from the perspective of the buying division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make decisions on their own, will a transfer probably take place? Complete this question by entering your answers in the tabs below. Req 1A Req 18 Req 10 What is the highest acceptable transfer price from the perspective of the buying division? lighest acceptable transfer price Chapter 11 Graded Homework i Saved 6 Required Information Exercise 11-13 (Algo) Transfer Pricing Situations [LO11-3] The following information applies to the questions displayed below.] 1.71 points In each of the cases below, assume Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their Skipped divisional profits. Case Division X: eBook Capacity in units 3,000 101, 006 Number of units being sold to outside customers 93,000 82 , 000 Selling price per unit to outside customers $ 60 $ 34 n Variable costs per unit $ 21 $ 16 References Fixed costs per unit (based on capacity) $ 5 Division Y: Number of units needed for production 19, 000 19, 000 Purchase price per unit now being paid to an outside supplier $ 55 $ 32 Exercise 11-13 (Algo) Part 1 Required: 1. Refer to the data in case A above. Assume in this case that $3 per unit in variable selling costs can be avoided on intracompany sales. a. What is the lowest acceptable transfer price from the perspective of the selling division? b. What Is the highest acceptable transfer price from the perspective of the buying division? C. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make decisions on their own, will a transfer probably take place? Complete this question by entering your answers in the tabs below. Req 1A Req 18 Req 10 What is the lowest acceptable transfer price from the perspective of the selling division? acceptab Req 1B > Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 1C What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make decisions on their own, will a transfer probably take place? 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
