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Unformatted text preview: 22-14Yes. The general transfer-pricing guideline specifies that the minimum transfer price equals the additional outlay costsper unit incurred up to the point of transfer plusthe opportunity costsper unit to the supplying division. When the supplying division has idle capacity, its opportunity costs are zero; when the supplying division has no idle capacity, its opportunity costs are positive. Hence, the minimum transfer price will vary depending on whether the supplying division has idle capacity or not.22-15Alternative transfer-pricing methods can result in sizable differences in the reported operating income of divisions in different income tax jurisdictions. If these jurisdictions have different tax rates or deductions, the net income of the company as a whole can be affected by the choice of the transfer-pricing method.22-16(25 min.)Decentralization, responsibility centers.1.The manufacturing plants in the Manufacturing Division are cost centers....
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