ook Calculator Pull Cost Plus Pricing and Negotiation Techno Inc. has two divisions: Auxiliary Components and Audio Systems Divisional managers are encouraged to maximize ROI and EVA Managers are essentially free to determine whether goods will be transferred internally and what will be the internal transfer prices Headquarters has directed that all internal prices be expressed on a full cost-plus basis. The markup in the cost pricing arrangement, however, is left to the discretion of the divisional managers. Recently, the two divisional managers met to discuss a pricing agreement for a subwoofer that would be sold with a personal computer system. Production of the subwoofers is et capacity. Subwoofers can be sold for $31 to outside customers. The Audio Systems Division can also buy the subwoofer from external sources for the same price, however, the manager of this division is hoping to obtain a price concession by buying Item The cost of manufacturing the subwoofer is $20. If the manager of the Audiary Components Division sets the Subwoofer internally $5 of sing and distribution costs can be avoided. The volume of business would be 250,000 units per year which is well within the capacity of the producing division Mer som disso, the two managers agreed on a full cost-plus pricing scheme that would be reviewed annually. Any increase in the outside selling price would be added to the transfer price by simply increasing the markup by an appropriate amount. Any major changes in the factors that led to the agreement could intate a new round of negotiation. Otherwise, the cost-plus arrangement would continue in force for subsequent years. Required: 1. Calculate the minimum and maximum transfer prices Minimum transfer price Maximum transfer price 2. Assume that the transfer price agreed on between the two managers is halfway between the minimum and maximum transfer prices Calculate this transfer price Round your answer to two decimal places What markup over full cost is implied by this transfer price? Round your answer to one decimal place Check My Workmore Check My Works remaining Previous Next > Emanetructor Save and be submit Agent for Grading 6 HK Maximum transfer price 2. Assume that the transfer price agreed on between the two managers is halfway between the minimum and maximum transfer prices Calculate this transfer price. Round your answer to two decimal places. What markup over full cost is implied by this transfer price? Round your answer to one decimal place 3. Refer to Requement 2. Assume that in the following year, the outside price of subwoofers increases to $32. What is the new full cost-plus transfer price? Round your answer to two decimal places. 4. CONCEPTUAL CONNECTION Assume that 2 years after the initial agreement, the market for subwoofers has softened considerably, causing excess capacity for the Auxiliary Components Division. Would you expect a renegotiation of the full cost-plus pricing arrangement for the coming year? Explain. 1. The two divisions would renegotiate because the buying division would probably be able to buy the necessary part at a lower price from another supplier. The Auxiliary Components Division might have to reduce its price. 2. The two divisions would not renegotiate because the buying division would probably not be able to buy the necessary part at a lower price from another supplier, The Auxiliary Components Division will continue to charge the same price 3. The two divisions would renegotiate because the buying division would probably not be able to buy the necessary part at the same price from another supplier, The Auxiliary Components Division might in fact increase its price, Check My Work Smore Check My Work uses remaining Previous Next > All work saved Email instructor Save and Ext Suomi Assignment for Grading delete "Trulloleil |