The assembling division uses component G along with externally supplied components, in the
assembly of product The assembling division can sell product externally for $ The costs
incurred by the assembling division, excluding the cost of component are as follows:
Determine the maximum and the minimum transfer price that could be used for each unit of
component G
Explain whether the managers would be able to negotiate a transfer price.
Indicate what the transfer price would be if it is set equal to full production costs.
Indicate what the transfer price would be if it is set equal to variable production costs.
Briefly explain why the manufacturing division would be reluctant to transfer component G
at a price equal to variable costs.
ldentify what other factors may have an influence on the determination of the transfer price.
