Required information Exercise 11-13 (Algo) Transfer Pricing Situations (L011-3) [The following information applies to the questions displayed below.) 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 thele divisional profits Case Division X1 Capacity in units Number of units being sold to outside customers Selling price per unit to outside customers Variable costs per unit Yixed 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 101,000 94.000 101,000 25,000 $ 51 5 22 3 22$ 20 $ 4 19,000 19,000 $ 47$ 40 2012 Exercise 11-13 (Algo) Part 2 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 of the managers are free to negotiate and make decisions on their own, wil 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? Lowest le transfer price Reg 26 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. Red 2A Reg 28 Reg 2c What is the highest acceptable transfer price from the perspective of the buying division? Highest acceptable transfer price 2 of 2 Complete this question by entering your answers in the tabs below. Reg 2A Reg 20 . Reg 2c book 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 anys There is not a range of acceptable transfer prices There is a range of acceptable transfer prices as shown below Transfer price Hint put References Are the managers likely to agree on a transfer price? Yes ONO Reg 28
