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San Jose Company operates a Manufacturing Division and an Assembly Division. Both divisions are evaluated as profit centers. Assembly buys components from Manufacturing and assembles
San Jose Company operates a Manufacturing Division and an Assembly Division. Both divisions are evaluated as profit centers. Assembly buys components from Manufacturing and assembles them for sale, Manufacturing sells many components to third parties in addition to Assembly Selected data from the two operations follow. Manufacturing Assembly Capacity (units) 412,000 212,000 Sales price 5 424 $ 1,360 Variable costs $ 220 $ 504 Fixed costs $40,120,000 $24, 120,000 a For Manufacturing, this is the price to third parties. For Assembly, this does not include the transfer price paid to Manufacturing, Suppose Manufacturing is located in Country A with a tax rate of 60 percent and As lembly in Country B with a tax rate of 40 percent. All other facts remain the same. Required: a. Current production levels in Manufacturing are 212,000 units, Assembly requests an additional 52,000 units to produce a special order. What transfer price would you recommend? b. Suppose Manufacturing is operating at full capacity. What transfer price would you recommend? c. Suppose Manufacturing is operating at 386,000 units. What transfer price would you recommend? (Round your answer to 2 decimal places.) a. Optimal transfer price b. Transfer price C. Transfer price per unit per unit per unit Prev 1 of 3 Next >
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