Answer-1
At Market Price 21.00 per unit
Alamosa would choose to transfer at that price as it will not be able to earn | ||||
any profit at that price | ||||
Tavaris would not choose to transfer at that price as it will reduce the divisions | ||||
cost and increase the profit. |
2 | As the Carreker Inc. requires transfer at full product cost plus 25%, transfer price will be | |||
Variable cost | $9.70 | |||
Fixed cost | $5.50 | |||
Total Cost | $15.20 | |||
25% Margin (15.20 x 25%) | $3.80 | |||
Transfer Price | $19.00 | |||
Alamosa would not choose to transfer at that price as this price is below the | ||||
market price. | ||||
Tavaris would chosse to transfer at that price as this price is below the market | ||||
price | ||||
3 | As the Carreker Inc. requires transfer at variable product cost plus fixed fee of $2 per unit, | |||
transfer price will be | ||||
Variable cost | $9.70 | |||
Fixed fee | $2.00 | |||
Total Cost | $11.70 | |||
Alamosa would not choose to transfer at that price as at that price it will not be able to cover | ||||
the fixed cost per unit | ||||
Tavaris would choose to transfer at that price as this price is below the market | ||||
price | ||||
4 | If Alamosa plans to produce and sells only 65000 unit, fixed cost per unit will be | |||
Total fixed cost ($5.50 x 90000 units) | 495000 | |||
Units to be produced and sell | 65000 | |||
Fixed cost per unit | 7.62 | |||
Alamosa will set the minimum transfer price | ||||
Variable cost | $9.70 | |||
Opportunity cost (21-9.70) | $11.30 | |||
Transfer Price | $21.00 | |||
Tavaris would set the maximum ttransfer price | ||||
Market price | $21 | |||
Both, Alamosa and Tavaris would choose to transfer | ||||
Determining Market-Based and Negotiated Transfer Prices Carreker, Inc., has a number of divisions, including the Alamosa...
Determining Market-Based and Negotiated Transfer Prices Carreker, Inc., has a number of divisions, including the Alamosa Division, producer of surgical blades, and the Tavaris Division, a manufacturer of medical instruments. Alamosa Division produces a 2.6 cm steel blade that can be used by Tavaris Division in the production of scalpels. The market price of the blade is $21.00. Cost information for the blade is: Variable product cost $9.40 Fixed cost 5.60 Total product cost $15.00 Tavaris needs 15,000 units of...
Determining Market-Based and Negotiated Transfer Prices Carreker, Inc., has a number of divisions, including the Alamosa Division, producer of surgical blades, and the Tavaris Division, a manufacturer of medical instruments. Alamosa Division produces a 2.6 cm steel blade that can be used by Tavaris Division in the production of scalpels. The market price of the blade is $21. Cost information for the blade is: Variable product cost $9.70 5.50 Fixed cost Total product cost $15.20 Tavaris needs 15,000 units of...
Determining Market-Based and Negotiated Transfer Prices Carreker, Inc., has a number of divisions, including the Alamosa Division, producer of surgical blades, and the Tavaris Division, a manufacturer of medical instruments. Alamosa Division produces a 2.4 cm steel blade that can be used by Tavaris Division in the production of scalpels. The market price of the blade is $22. Cost information for the blade is: Variable product cost $ 9.40 Fixed cost 5.60 Total product cost $15.00 Tavaris needs 20,000 units...
Determining Market-Based and Negotiated Transfer Prices Carreker, Inc., has a number of divisions, including the Alamosa Division, producer of surgical blades, and the Tavaris Division, a manufacturer of medical instruments. Alamosa Division produces a 2.6 cm steel blade that can be used by Tavaris Division in the production of scalpels. The market price of the blade is $21. Cost information for the blade is: Variable product cost $ 9.30 Fixed cost 5.30 Total product cost $14.60 Tavaris needs 18,000 units...
Determining Market-Based and Negotiated Transfer Prices Carreker, Inc., has a number of divisions, including the Alamosa Division, producer of surgical blades, and the Tavaris Division, a manufacturer of medical instruments. Alamosa Division produces a 2.6 cm steel blade that can be used by Tavaris Division in the production of scalpels. The market price of the blade is $25. Cost information for the blade is: Variable product cost $ 9.70 Fixed cost 5.30 Total product cost $15.00 Tavaris needs 18,000 units...
I figured out the whole thing except question 3, part 1. I'm not sure how to do it. Thanks! Determining Market-Based and Negotiated Transfer Prices Carreker, Inc., has a number of divisions, including the Alamosa Division, producer of surgical blades, and the Tavaris Division, a manufacturer of medical instruments. Alamosa Division produces a 2.4 cm steel blade that can be used by Tavaris Division in the production of scalpels. The market price of the blade is $24. Cost information for...
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