Chapter 12 Homework 3

Chapter 12 Homework 3 - will both have improved profits. 4....

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Chapter 12 Case 35 1. Transfer price $8.25 + ($12.50 – $8.25) = $12.50 The electronics division must give up sales of $12.50 for every unit that they sell to the clock division so they should not sell the circuit boards for less than $12.50 2. Selling Price of Timing Device $70.00 -Cost of circuit board (12.50) -Variable Costs (55.75) Net effect on profit $ 6.75 Yes, because they will profit $6.75 more on every timing device sold. 3. Yes, they should be able to agree on a price between $12.50 and $19.25 because they
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Unformatted text preview: will both have improved profits. 4. The problem is that each divisional manager is more concerned with the profitability of their division than of the whole company. The two managers should sit down and should be able to agree on a transfer price that can benefit both of them. The president should facilitate a meeting between the two managers but should not force any agreement because he does not know the departments as well as the managers do....
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This note was uploaded on 11/16/2009 for the course ACCT 152 taught by Professor Bayak during the Spring '07 term at Lehigh University .

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