Solutions%20to%20missed%20tutorial%20Nov%2026%20or%2027%20Problem%2011-18

Solutions%20to%20missed%20tutorial%20Nov%2026%20or%2027%20Problem%2011-18

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Unformatted text preview: Problem 11-18 (60 minutes) 1. From the standpoint of the selling division, Division A: Total contribution margin on lost sales Variable cost Transfer price + per unit Number of units transferred Transfer price ($63 - $5) +[($100 - $63) 10,000]/10,000 $58 + $37 = 95 But, from the standpoint of the buying division, Division B: Transfer price Cost of buying from outside supplier = $92 Division B wont pay more than $92 and Division A will not accept less than $95, so no deal is possible. There will be no transfer. 2. a. From the standpoint of the selling division, Division A: Total contribution margin on lost sales Variable cost Transfer price + per unit Number of units transferred ? Transfer price ($19 - $4) +[($40 - $19) 70,000]/70,000 $15 + $21 = 36 From the standpoint of the buying division, Division B: Transfer price Cost of buying from outside supplier = $39 In this instance, an agreement is possible within the range: $36 Transfer price $39 Even though both managers would be better off with any transfer price within this range, they may disagree about the exact amount of the transfer price. It would not be surprising to hear the buying of the transfer price....
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This note was uploaded on 06/14/2011 for the course BUS 254 taught by Professor Favere-marchesi during the Fall '10 term at Simon Fraser.

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Solutions%20to%20missed%20tutorial%20Nov%2026%20or%2027%20Problem%2011-18

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