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 of the 2.4 cm blade per year. Alamosa Division is at full capacity (90,000 units of the blade).
Required:
1. If Carreker, Inc., has a transfer pricing policy that
requires transfer at market price, what would the transfer price
be?
$ per unit
Do you suppose that Alamosa and Tavaris divisions would choose
to transfer at that price?
2. Now suppose that Carreker, Inc., allows negotiated transfer
pricing and that Alamosa Division can avoid $1.60 of selling and
distribution expense by selling to Tavaris Division. Which division
sets the minimum transfer price, and what is it? Round your answers
to the nearest cent, if needed.
$ per unit
Which division sets the maximum transfer price, and what is
it?
$ per unit
Do you suppose that Alamosa and Tavaris divisions would choose
to transfer somewhere in the bargaining range?
3. What if Alamosa Division plans to produce and sell only
62,000 units of the 2.4 cm blade next year? Which division sets the
minimum transfer price, and what is it? Round your answers to the
nearest cent, if needed.
$ per unit
Which division sets the maximum transfer price, and what is
it?
$ per unit
Do you suppose that Alamosa and Tavaris divisions would choose
to transfer somewhere in the bargaining range?
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 $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...
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 $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 2.6 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...
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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