Division A sells a component to Division B at a transfer price of $30. The...
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Accounting
Division A sells a component to Division B at a transfer price of $30. The variable cost per unit is $20, and Division B sells the final product for $50. Fixed costs for Division A and B are $40,000 and $30,000, respectively.
Requirements:(a) Calculate the contribution margin for each division. (b) Determine the overall company profit. (c) Analyze the impact of the transfer price on each division’s performance. (d) Discuss the importance of transfer pricing in a decentralized organization.
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