General transfer pricing rule maximum amount willing to pay

Assignment Help Financial Accounting

Reference no: EM13355826

General transfer pricing rule, maximum amount willing to pay as transfer price.

Fragrance, Inc. has two divisions-the Cologne Division and the Bottle Division. The company is decentralized, and each division is evaluated as a profit center. The Bottle Division produces bottles which can be used by the Cologne Division. The Bottle Division's variable manufacturing cost per unit is $2.00, and shipping costs are $0.10 per unit. The Bottle Division's external sales price is $3.00 per unit. No shipping costs are incurred on sales to the Cologne Division. The Cologne Division can purchase similar bottles in the external market for $2.50.

1. The Bottle Division has sufficient capacity to meet all external market demands in addition to meeting the demands of the Cologne Division. Use the general transfer pricing rule to compute the transfer price from the Bottle Division to the Cologne Division.

a. $2.00

b. $2.10

c. $2.50

d. $2.90

e. $3.00

2. Assume the Bottle Division has no excess capacity and could sell everything produced externally. Use the general rule to compute the transfer price from the Bottle Division to the Cologne Division.

a. $2.00

b. $2.10

c. $2.50

d. $2.90

e. $3.00

3. What is the maximum amount the Cologne Division would be willing to pay for the bottles?

a. $2.00

b. $2.10

c. $2.50

d. $2.90

e. $3.00

Reference no: EM13355826

Questions Cloud

Number of units to be produced to maintain the same net : number of units to be produced to maintain the same net income.wilson is a wholesale distributor of widgets. the

Hourly rate to cover the cost of each financial adviserwork : hourly rate to cover the cost of each financial adviser.work the problem using the following variables average salary

Compute the chmelar manufacturingnbsp costchmelar : compute the chmelar manufacturingnbsp cost.chmelar manufacturing company developed the following data

Over head application to jobvektek inc thinks a machine : over head application to job.vektek inc. thinks a machine hour is the best activity base for its manufacturing

General transfer pricing rule maximum amount willing to pay : general transfer pricing rule maximum amount willing to pay as transfer price.fragrance inc. has two divisions-the

Calculate ratios and compare results with industry : calculate ratios and compare results with industry averages.calculate a few ratios and compare reeds results with

Inventory reduction sale tightens his working capital : inventory reduction sale tightens his working capital policy to the averages.1.why does holmes want reeds to have an

Pro forma income statementassuming that reeds can improve : pro forma income statement.assuming that reeds can improve its operations to be in line with the industry averages

Type of inventory control system and type of accounts : type of inventory control system and type of accounts receivable control.a.nbsp what type of inventory control system

User Account

All Pages