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  3. in each of the cases below, assume that division x

In each of the cases below, assume that Division x has a product that can...

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Accounting

In each of the cases below, assume that 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-a. Refer to the data in case A above. Assume that $3 per unit in variable selling costs can be avoided on intracompany sales.
Determine the transfer price of the selling division.
Transfer price
1-b. If the managers are free to negotiate and make decisions on their own, will a transfer take place?
Yes
No
2-a. Refer to the data in case B above. In this case there will be no reduction in variable selling costs on intracompany sales.
Determine the transfer price of the selling division.
Transfer price
2-b. If the managers are free to negotiate and make decisions on their own, will a transfer take place?
Yes
No
2-c. What is the range of transfer price the managers of both divisions should agree?
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