Worksheet- Transfer Pricing Problem ACCT& 203 consists of only two divisions, Division 1 and Division 2. Division 1 sold to Division 2 makes and sells wheels that can either be sold to outside customers or Both Divisions are evaluated as profit centers. month. The following data is available from last Division 1: Selling price per wheel to outside customers Variable cost per wheel when sold to outside customers Capacity in wheels Wheels currently sold to outside customers Fixed Costs 35 35-235 10,000 1,000,000 15133-8 Division 2 Number of wheels needed per month Price per wheel paid to an outside supplier Fixed Costs 5,000 $47 $1,200,000 If Division 1 sells the wheels to Division 2, Division 1 can avoid $2 per wheel in sales commissions. Given the condition cited above, what is the range in which division managers from each division should use in negotiating a fair transfer price? What is the increase in income to the company if the transfer is worked out? a. b. How would the answer in (a) change if Division 1 were currently selling 15,000 wheels to outside customers and if the company forced Division 1 to sell to Division 2 at Market Price? 8 1. As of January 1 of the current year, the Grackle Company had accounts receivables of $50,000. The sales for January, February, and March were as follows: $120,000, $140,000, and $150,000, respectively. Of each month's sales, 20% are for cash. Of the remaining 80% (the credit sales), 60%are collected in the month of sale, with the remaining-40% collected in the following month. What is the total cash collected (both from accounts receivable and cash sales) in the month of March? D a. $116,800 D b. $74,800 c, $102,000 D d. $146,800 5