Question $3$

Question $4$

Question $5$

Question $6$

Question $7$

Question $8$

Requirements

What is the highest acceptable transfer price for the divisions?

Assuming the transfer price is negotiated between the divisions of the company, what would be

the lowest acceptable transfer price? Assume variable selling expenses pertain to outside sales

only.

Which transfer price would the manager of the Small Components Division prefer? Which transfer

price would the manager of the Computer Division prefer?

If the company's policy requires that all in$-$house transfers must be priced at full absorption cost

plus $16\%,$ what transfer price would be used? Assume that the increased production level needed

to fill the transfer would result in fixed manufacturing overhead decreasing by $$1\mathrm{.}00$ per unit.

$($Round your answer to the nearest cent.$)$

If the company's policy requires that all in$-$house transfers must be priced at total manufacturing

variable cost plus $30\%,$ what transfer price would be used? Assume that the company does not

consider fixed manufacturing overhead in setting its internal transfer price in this scenario.

$($Round your answer to the nearest cent.$)$

Assume now that the company does incur the variable selling expenses on internal transfers. If

the company policy is to set transfer prices at $101\%$ of the sum of the full absorption cost and the

variable selling expenses, what transfer price would be set? Assume that the fixed manufacturing

overhead would drop by $$1\mathrm{.}00$ per unit as a result of the increased production resulting from the

internal transfers. $($Round your answer to the nearest cent.$)$

market price

sales only.

The lowest acceptable transfer price for the divisions is the Small Components Division's

variable costs

The manager of the Small Components Division would prefer a transfer price of

The manager of the Computer Division would prefer a transfer price of

needed to fill the transfer would result in fixed manufacturing overhead decreasing by $$1\mathrm{.}00$ per unit. $($Round your answer to the nearest cent.$)$

Begin by selecting the formula to compute the transfer price under this strategy. $($Abbreviation used: MOH$=Ma$

$u$ facturing overhead.$)$

More info

The Computer Division of Martin Manufacturing can use the video card produced by

the Small Components Division and is interested in purchasing the video

card in$-$house rather than buying it from an outside supplier. The Small Components

Division has sufficient excess capacity with which to make the extra video cards.

Because of competition, the market price for this video card is $$26$ regardless of

whether the video card is produced by Martin Manufacturing or another company.