Which transfer-price method each division manager prefer

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Problem

The Monarch Butterfly Company specializes in manufacturing plastic organizers. It has three operating divisions: molding, assembling, and packaging. Currently, all parts created in the molding division are assembled by the assembling division. The assembling division has a practical capacity of 1,000 organizers made from 5,000 parts. Cost and market price data for the two divisions are as follows: Molding Division: Variable costs per part $0.0785 Fixed costs per part 0.1579 Selling price per part 0.9500 Assembling Division: Variable assembling costs per organizer $0.3307 Fixed costs per organizer 0.8267 Selling price per organizer 3.0000 Required: Calculate the operating income per unit for each division for each of the following transfer-pricing methods: 150% of full cost - keep all calculations and answers in four decimal places. Market price - keep all calculations and answers in four decimal places. Get the instant assignment help. Which transfer-price method will each division manager prefer? Why? How might the company resolve any conflicts that may arise on the issue of transfer pricing?

Reference no: EM133920590

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