Home / Questions / Pertinent transfer price, perfect and imperfect markets. Wheely, Inc., has two divis
Pertinent transfer price, perfect and imperfect markets. Wheely, Inc., has two divisions, A and B, that manufacture expensive bicycles. Division A produces the bicycle frame, and division B assembles the rest of the bicycle onto the frame. There is a market for both the subassembly and the final product. Each 869870division has been designated as a profit center. The transfer price for the subassembly has been set at the longrun average market price. The following data are available for each division:
Selling price for final product 
$360 
Longrun average selling price for intermediate product 
275 
Incremental cost per unit for completion in division B 
20 
Incremental cost per unit in division A 
90 
The manager of division B has made the following calculation:
Selling price for final product 

$360 
Transferredin cost per unit (market) 
$275 

Incremental cost per unit for completion 
120 
395 
Contribution (loss) on product 

$ (35) 
Q#1: Should transfers be made to division B if there is no unused capacity in division A? Is the market price the correct transfer price? Show your computations.
Q#2: Assume that division A’s maximum capacity for this product is 1,200 units per month and sales to the intermediate market are now 900 units. Should 300 units be transferred to division B? At what transfer price? Assume that for a variety of reasons, division A will maintain the $275 selling price indefinitely. That is, division A is not considering lowering the price to outsiders even if idle capacity exists.
Nov 08 2017 View more View Less
Assume you are working with a firm with the following indicators: Share Price at time 1 = 142 $ Earning by share at time 2 = 8 $ Portion of earnings paid out of dividends...
Apr 15 2021Given a 5 percent interest rate, compute the year 6 future value of deposits made in years 1, 2, 3, and 4 of $1,500, $1,700, $1,700, and $2,000. (Do not round intermediat...
May 28 2018Determine the interest by mixedcapitalization and real interest of an investment of USD 300,000 the interest rate of 80% per year, capitalizating by semester, beyond the ...
Aug 03 2021ion 20 et ered Al Khaleej Inc. needs 325 kgs of a material per month. It costs RO 100 to make and receive an order, and it takes 16 workdays to receive it. The annual hol...
Apr 30 2021In January 2007, the average price of an asset was $27,058. 8 years earlier, the average price was $21,408. What was the annual increase in selling price?
Aug 21 2020On September 1, a company purchased a vehicle for $93,000 with a residual value of $7,000. The estimated useful life is 8 years and the company uses the straightline met...
Mar 26 2020So far, victims of catfishing have had little success in the courts. Under what circumstances might a person be able to collect damages for fraudulent misrepresentation i...
Aug 19 2021Any really good FREE antivirus programs?
Apr 24 2020Give examples and describe the various means by which the US government collects revenues and then spends or redistribute the gained revenues.
Jun 02 2020Early unions were considered by the courts to bea. harmlessb. legal if they operated within a state’s bordersc. a criminal conspiracyd. in the public’s intereste. illegal...
Dec 11 2019