Should transfers be made to division B if there is no unused capacity in

Should transfers be made to division b if there is no

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Should transfers be made to division B if there is no unused capacity in divisionA? Select the formula you will use to calculate the correct transfer price.Is the market price the correct transferprice? YesRequirement 2. Assume that division A's maximum capacity for this product is 1,700 units per month and sales to the intermediate market are now 1,360 units. Assume that for a variety of reasons, division A will maintain the $300 selling price indefinitely. That is, division A is not considering lowering the price to outsiders even if idle capacity exists. Should 340 units be transferred to division B? At what transfer price?Should 340 units be transferred to division B? At what transfer price?Requirement 3. Suppose division A quoted a transfer price of $190 for up to 340units. What would be the contribution to the company as a whole if a transfer weremade? As manager of divisionB, would you be inclined to buy at $190? Explain.Complete the table below using the transfer price of $190to compute the contribution margin to division B. 0?
Requirement 4. Suppose the manager of division A has the option of(a) cutting the external price to $292, with the certainty that sales will rise to 1,700units, or(b) maintaining the external price of $300for the 1,360units and transferring the 340units to division B at a price that would produce the same operating income for division A. What transfer price would produce the same operating income for divisionA? Is that price consistent with that recommended by the general guideline so that the resulting decision would be desirable for the company as awhole?Select the formula to calculate the minimum transferprice, then calculate the minimum transfer price.

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