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 has a product that can be sold either to outside customers or to Division of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits:
Division :
Number of units needed for production
Purchase price per unit now being paid to an outside supplier
$
Required:
a Refer to the data in case A above. Assume that $ per unit in variable selling costs can be avoided on intracompany sales. Determine the transfer price of the selling division.
Transfer price
b If the managers are free to negotiate and make decisions on their own, will a transfer take place?
Yes
No
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