Reference no: EM132469240
Estimated annual production: 400.000 reels
Estimated sales to outside entities: 300.000 reels
Estimated sales by the Reel Division to the Rod Division: 100,000 reels The managers of the two divisions are clurently negotiating a transfer price.
Required:
Question 1 - Determine a transfer price based on variable product cost.
Question 2- Determine a transfer price based on total variable product cost plus markup.
Question 3- Determine a transfer price based on full production cost.
Question 4- Determine a transfer price based on total cost per reel.
Question 5- Assume that the Rec Division has no alternative use for the facilities that make the reels for internal transfer. Also assume that the Reel Division can buy equivalent reels externally for H5. Calculate the upper and lower limits for which the transfer price should be set.
Question 6- Compute a transfer price that divides the "pro?t" between the two divisions equally.
Question 7- In contrast to the assumption in part (5), assume that the Reel Division can rent the facilities in which the 100,000 reels are produced for £100,000. Determine the lower
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