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Lambda Technology Scenario: Transfer Pricing Decision Data: Lambda Technology has two divisions: Division A and Division B. Division A produces a component that Division B
- Lambda Technology
Scenario: Transfer Pricing Decision
Data: Lambda Technology has two divisions: Division A and Division B. Division A produces a component that Division B needs for its final product. Division A's variable cost per unit is $30, and Division B can buy the component from external suppliers for $35 per unit.
Requirements:
- Calculate the minimum transfer price for Division A to sell the component to Division B.
- Determine whether Lambda Technology should use cost-based or market-based transfer pricing.
- Discuss the advantages and disadvantages of transfer pricing methods.
- Analyze the impact of transfer pricing on divisional performance and profitability.
- Evaluate Lambda Technology's governance and control mechanisms for transfer pricing.
- Recommend a transfer pricing policy that aligns with Lambda Technology's strategic objectives.
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