Transfer Pricing Strategy

Division Details:

• Division E (Manufacturing):
  • Variable Costs: $600,000
  • Fixed Costs: $350,000
  • Production Capacity: 50,000 units

• Division F (Sales):
  • Variable Costs: $500,000
  • Fixed Costs: $250,000
  • Demand: 40,000 units

Requirements:

• Determine the transfer price per unit for Division F to acquire products from Division E using the negotiated price method.
• Evaluate the impact on the overall profitability of the company.
• Present the transfer pricing calculations in a table.
• Discuss the benefits and challenges of the chosen transfer pricing method.