Q3: Al-Khour group owns two subsidiaries North and South. North produces and sells Woods; the cost structure is as the following: Variable Cost 190$ per ton. The North can sell up to 15000 tons to external market at 340$ pen ton. The South usually purchases 3000 units from the market for 300$ and then sell it for 400$. Requirements: 1. If the North currently sells 14000 tons to the market what is the range of transfer price with th South
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- Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $12. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the full-cost-based transfer price? • Variable cost per unit $6.69 Fixed cost per unit 1.47 . Division B sales price of Component X 14,50Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $12. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost-based transfer price? Variable cost per unit $7.48 • Fixed cost per unit 1.97 • Division B sales price of Component X 14.50Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $14. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost plus assuming 22% transfer price? • Variable cost per unit $6.71 • Fixed cost per unit 1.03 • Division B sales price of Component X 14.50
- Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $14. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost plus assuming 22% transfer price? • Variable cost per unit $7.27 Fixed cost per unit 1.93 • Division B sales price of Component X 14.50Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $13. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the full-cost-based transfer price? Variable cost per unit $7.89 Fixed cost per unit 1.48 Division B sales price of Component X 14.51. The Selling Division’s unit sales price is P20 and its unit variable cost is P8. Its capacity is 10,000 units. Fixed costs per unit are P4. Current outside sales is 10,000 units. What is the minimum transfer price that the Selling Division would be willing to accept if 3,000 units will be sold to the Purchasing Division? Assume that the Purchasing Division can buy the same from outside market at P18.50. _____________________2. The Selling Division’s unit sales price is P20 and its unit variable cost is P8. Its capacity is 10,000 units. Fixed costs per unit are P4. Current outside sales are 7,000 units. What is the Selling Division’s opportunity cost per unit from selling 3,000 units to the Purchasing Division? Assume that the Purchasing Division can buy the same from outside market at P18.50 ______________________3. The Selling Division’s unit sales price is P20 and its unit variable cost is P8. Its capacity is 10,000 units. Fixed costs per unit are P4. Current outside sales is…
- Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $13. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost-based transfer price? Variable cost per unit $6.31 Fixed cost per unit 1.36 Division B sales price of Component X 14.5Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $12. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the full-cost plus assuming 19% transfer price? • Variable cost per unit $7.02 • Fixed cost per unit 1.42 • Division B sales price of Component X 14.50The Selling Division’s unit sales price is P20 and its unit variable cost is P10. Its capacity is 10,000 units. Fixed costs per unit are P4. Current outside sales is 7,500 units. What is the maximum transfer price that the Purchasing Division would be willing to accept if 4,000 units will be sold to the Purchasing Division? Assume that the Purchasing Division can buy the same from outside market at P18.50 and that a cost of P1 per unit will be saved from the transfer. _____________________5. The Selling Division’s unit sales price is P20 and its unit variable cost is P10. Its capacity is 10,000 units. Fixed costs per unit are P4. Current outside sales is 10,000 units. What is the maximum transfer price that the Purchasing Division would be willing to accept if 4,000 units will be sold to the Purchasing Division? Assume that the Purchasing Division can buy the same from outside market at P18.50. _____________________6. The Selling Division’s unit sales price is P19 and its unit variable…
- 7. Transfer Pricing Domagisko Company's Division 'S' (selling division) produces a small tool used by other companies as a key part in their products. Cost and sales data related to the small tool are given below: Selling price per unit Variable costs per unit P 50 P 30 Fixed costs per unit* P 12 based on capacity of 40,000 tools per year. The company's Division 'B' (buying division) is introducing a new product that will use the same tool such as the one produced by Division S. An outside supplier has quoted the Division B a price of P 48 per tool. Division B would like to purchase the tools from Division S, only if an acceptable transfer price can be worked out. REQUIRED: Consider the following independent cases: 1. Division S has ample idle capacity to handle all the Division B's needs: A) What is the minimum transfer price for Division S? B) What is the maximum transfer price for Division B? 2. Division S is presently selling all the tools it can produce to outside customers: A)…Q) Spark ltd has two divisions, assembly and electrical. The assembly division transfers partially completed components to the electrical division at a predetermined transfer price. The assembly division's standard variable production cost per unit is $550. This division has spare capacity, and it could sell all its components to outside buyers at $680 per unit in a perfectly competitive market. Required: a) Determine a transfer price using the general rule. b) How would the transfer price change if the assembly divisions had no spare capacity? c) What transfer price would you recommend if there was no outside market for the transferred component and the assembly division had spare capacity? d) Explain how negotiation between the supplying and buying units may be used to set transfer price? How does this relate to the general transfer pricing rule?Required:(a) GEM has an opportunity to sell 10 000 units to an overseas customer. Import duties and other special costs associated with this order would total $42 000. The only selling costs that would be associated with the order would be a shipping cost of $9.00 per unit. What would be the minimum acceptable unit price for GEM to consider this order? (hint: GEM would not accept the order if it would reduce the company’s profit) (b) The company has 200 units of Flicks on hand that were produced two months ago. Due to blemishes on the units, it will be impossible to sell these units at the normal price. If the company wishes to sell them through regular sales channels, what would be the relevant cost for setting the minimum price? Explain. (c) “All future costs are relevant in decision making.” Do you agree? Explain.