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 divisional profits. Case A Division X: Capacity in units Number of units being sold to outside customers Selling price per unit to outside customers Variable costs per unit Fixed costs per unit (based on capacity) Division Y: Number of units needed for production Purchase price per unit now being paid to an outside supplier 93,800 107,000 93,000 85,000 $ 51 $ 32 $ 22 $17 $ 7 $ 5 22,060 22,000 $ 45$ 34 Required: 1. Refer to the data in case A above. Assume in this case that $2 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. Reg 1A Reg 18 Regic What is the lowest acceptable transfer price from the perspective of the selling division? Lowest acceptable transfer price Complete this question by entering your answers in the tabs below. Reg 1A Reg 18 Reg 1C What is the highest acceptable transfer price from the perspective of the buying division? Highest acceptable transfer price Complete this question by entering your answers in the tabs below. Req 1A Reg 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 s 5 Are the managers likely to agree on a transfer price? Yes ONO Required: 2 Refer to the data in case B above. In this case, there will be no savings in variable selling costs 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? 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. Reg 2A Reg 28 Reg 20 What is the lowest acceptable transfer price from the perspective of the selling division? Lowot acceptable transfer price Required: 2. Refer to the data in case B above In this case, there will be no savings in variable selling costs 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. Req2A Red 2 Reg 20 What is the highest acceptable transfer price from the perspective of the buying division? Highest acceptable transfer price Complete this question by entering your answers in the tabs below. Req 2A Reg 2B Req 20 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 beles Transfer price Are the managers likely to agree on a transfer price? OYes ONO
