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Use the Interactive Graph to answer the following questions: 6. Now suppose that the Parts Division can avoid certain variable costs of packaging if the component is transferred internally. The avoidable packaging cost is $0.60 per unit. a. What is the maximum transfer price? $:] J per unit [3. what is the minimum transfer price? (Round your answer to the nearest cent.) _ K per unit c. Suppose the Parts Division offers the component to the Appliance Division for $5.90. What is the benet to the Parts Division of that transfer price? Parts Division will be $?,500 better off. J To the Appliance Division? Appliance Division will be $1,500 better off. J To Hill, Inc. as a whole? Hill, Inc. will be $9,000 better off. J d. Suppose the Appliance Division offers to buy the component from the Parts Division for $5.60. what is the benet to the Parts Division of that transfer price? Parts Division will be $3,000 better off. J To the Appliance Division? Appliance Division will be $6,000 better off. J To Hill, Inc. as a whole? Hill, Inc. will be $9,000 better off. J Continue to vary the transfer plice within the bargaining range to see the impact on the two divisions and on the companyr as a whole. @ Hill. Inc.. has two divisions: Appliance Division and Parts Division. The Parts Division makes a component that can be used in a product assembled by Appliance Division. Currently. the market price of the component is $6. Data on the component and on the nal product are as follows: Component Final Product (Parts Division} (Appliance Division} Prioe (set by outside market) Unit valiable oost without oomponent Hill, Inc., requires that any:r transfers that occur take plaoe at full manufacturing cost. However, division managers maulr agree to refuse to transfer at that price. 1. what is the full cost transfer price? (Round your answer to the nearest cent.) '.- 28.15 X 2. will Parts Division be willing to transfer at that prioe? No, it is less lan the marllet price and Parts Division can sell all that it makes at the market price. n} will Applianoe Division be willing to transfer at that price? Yes, it is less than the market price and that will help Appliance Division. if Use the Interaclive Graph to answer me following questions: 3. Suppose that the Parts Division agrees to sell the component to the Appliance Division forfull manufacturing cost. No other costs will change. What is the benet to the Parts Division of that transfer price? Parls Division will be $125,000 worse off. 1/ To the Appliance Division? Appliance Division will be $125,000 better off. 1/ Transfer Pricing Hill, Inc., has two divisions: Appliance Division and Parts Division. The Parts Division makes a component that can be used in a product assembled by Appliance Division. Currently, the market price of the component is $6. Data on the component and on the nal product are as follows: The Parts Division can produce ?0,(]Dl] units ofthe component and expects to produce and sell 70,000 units next year. The Appliance Division expects to produce and sell 15,000 units ofnal product next vear. Hill, Inc., allows division to negotiate their own transfer prices. 1_ which division sets the ceiling of the bargaining range or maximum transfer price? Appliance Division vi 2. which division sets the oor of the bargaining range or minimum transfer price? Part3 Division J 3. what is the maximum transfer price? if per unit 4.. what is the minimum transfer price? K per unit 5. which of the following statements is true regarding the bargaining range? It doesn't matter whether the divisions transfer the component or not. 1
