90.2K

Verified Solution

Link Copied!

can you please answer all questions from 1 A to 3 C please and explain it step by step. thank you!

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 their divisional profits. Required: 1. Refer to the data in case A above. Assume in this case Page 527 that $3 per unit in variable selling costs can be avoided 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 sbeingsoldtooutsidecustomersunittooutsidecustomersrunitanit(basedoncapacity)neededforproductionlerunitnowbeingpaidtoanoutsidesupplier200,000200,000$90$70$1340,000$86200,000160,000$75$60$840,000$74 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? Explain. 1. There is no idle capacity, so each of the units transferred from Division X to Division Y reduces sales to outsiders by one unit. The contribution margin per unit on outside sales is $ (=$$). 1.a Transfer price for the selling division: 87 1.b Transfer price for the buying division: 8/6 1.c Range: there's no range and a trans fer wo not take place 2. In this case, Division X has enough idle capacity to satisly Division Y 's demand. Therefore, there are no lost sales. 2.a Transfer price for the selling division: 2.b Transfer price for the buying division: 2.c Range 3. (not in book) Assume that in case B (\#2), Division X would lose 10.000 units in outside sales in order to satisfy Division Y's demand. 3.a Transter price for the selling division: 3.b Transfer price for the buying division: 3.c Range

Answer & Explanation Solved by verified expert

See Answer