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 the blade is:
Variable product cost | $ 9.40 |
Fixed cost | 5.00 |
Total product cost | $14.40 |
Tavaris needs 18,000 units of the 2.4 cm blade per year. Alamosa Division is at full capacity (88,000 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?
Yes
2. Now suppose that Carreker, Inc., allows
negotiated transfer pricing and that Alamosa Division can avoid
$1.50 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.
Alamosa $ per unit
Which division sets the maximum transfer price, and what is
it?
Tavaris $ per unit
Do you suppose that Alamosa and Tavaris divisions would choose
to transfer somewhere in the bargaining range?
Yes
3. What if Alamosa
Division plans to produce and sell only 67,000 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.
Alamosa $ per unit
Which division sets the maximum transfer price, and what is
it?
Tavaris $ per unit
Do you suppose that Alamosa and Tavaris divisions would choose
to transfer somewhere in the bargaining range?
Yes
Only Part 3
What if Alamosa Division plans to produce and sell only 67,000 units of the 2.4 cm blade next year? Which division sets the minimum transfer price, and what is it? |
Alamosa Division, producer of surgical blades sets minimum price to make arrangement the inter-division transaction. Minimum transfer price will be at the variable product cost per blade. |
Alamosa division sets the minimum transfer price at $9.40 |
Which division sets the maximum transfer price, and what is it? |
Tavaris Division, a manufacturer of medical instruments sets maximum price to make arrangement the inter-division transaction. Maximum transfer price will be at the market price per blade. |
Tavaris division sets the maximum transfer price at $24. |
Do you suppose that Alamosa and Tavaris divisions would choose to transfer somewhere in the bargaining range? |
Minimum transfer price = $9.40 |
Maximum transfer price = $24 |
Yes, Alamosa and Tavaris divisions would choose to transfer between the range of $9.40 to $24. |
I figured out the whole thing except question 3, part 1. I'm not sure how to...
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...
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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 $9.70 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...
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