QUESTION 1:

QUESTION 2:

QUESTION 3:

Aulman Inc. has a number of divisions, including a Furniture Division and a Motel Division. The Motel Division owns and operates a line of budget motels located along major highways. Each year, the Motel Division purchases furniture for the motel rooms. Currently, it purchases a basic dresser from an outside supplier for $40. The manager of the Furniture Division has approached the manager of the Motel Division about sellin dressers to the Motel Division. The full product cost of a dresser is $29. The Furniture Division can sell all of the dressers it makes to outside companies for $40. The Motel Division needs 10,000 dressers per year; th Furniture Division can make up to 50,000 dressers per year. Required: 1. Which division sets the maximum transfer price? Which division sets the minimum transfer price? The maximum transfer price Furniture Division X The minimum transfer price Motel Division X 2. Suppose the company policy is that all transfers take place at full cost. What is the transfer price? $ 40 X 3. CONCEPTUAL CONNECTION Do you think that the transfer will occur at the companymandated transfer price? Motel Division Yes Furniture Division No Aulman Inc. has a number of divisions, including a Furniture Division and a Motel Division. The Mote Division owns and operates a line of budget motels located along major highways. Each year, the Mo Division purchases furniture for the motel rooms. Currently, it purchases a basic dresser from an out supplier for $40. The manager of the Furniture Division has approached the manager of the Motel Division about selling dressers to the Motel Division. The full product cost of a dresser is $29. The Furniture Division can sell all of the dressers it makes to outside companies for $40. The Motel Divisi needs 10,000 dressers per year; the Furniture Division can make up to 50,000 dressers per year. Al assume that the company policy is that all transfer prices are negotiated by the divisions involved. Required: 1. What is the maximum transfer price? $ 40 Which division sets it? Motel Division 2. What is the minimum transfer price? $ 29 Which division sets it? Furniture Division 3. Conceptual Connection: If the transfer takes place, what will be the transfer price? $ 40 Transfer Pricing Aulman Inc. has a number of divisions including a Furniture Division and a Motel Division. The Motel Division owns and operates a line of budget motels located along major highway purchases furniture for the motel rooms. Currently, it purchases a basic dresser from an outside supplier for $60. The manager of the Furniture Division has approached the manager dressers to the Motel Division. The full product cost of a dresser is $29. expects to produce and sell only 40,000 dressers for $60 eac While the Furniture Division has been operating at capacity (50,000 dressers per year) and selling them for $60 each, incurs variable costs of $11 per dresser. The Motel Division needs 10,000 dressers per year; the Furniture Division can make up to 50,000 dressers per year. The company policy is that all transfer prices are negotiated by t Required: 1. What is the maximum transfer price? Which division sets it? Motel Division 2. What is the minimum transfer price? Which division sets it? Furniture Division 3. Suppose that the two divisions agree on a transfer price of $32. What is the benefit for the Furniture Division? For the Motel Division? For Aulman Inc. as a whole? Benefit to Furniture Division $ Benefit to Motel Division Benefit to company