Determining Market-Based and Negotiated Transfer Prices Carreker, Inc., has a nu

Question

Determining Market-Based and Negotiated Transfer Prices Carreker, Inc., has a number of divisions, including the Alamosa Division, producer of surgical blades, and the Tavaris Division, a manufacturer of medical instruments Alamosa Division produces a 2.6 cm steel blade that can be used by Tavaris Division in the production of scalpels. The market price of the blade is $21. Cost information for the blade is: $9.70 5.50 $15.20 Variable product cost Fixed cost Total product cost Tavaris needs 15,000 units of the 2.6 cm blade per year. Alamosa Division is at full capacity (90,000 units of the blade) Required: Round your answers to the nearest cent. 1. If Carreker, Inc., has a transfer pricing policy that requires transfer at full product cost, what would the transfer price be? per unit Do you suppose that Alamosa and Tavaris divisions would choose to transfer at that price? Alamosa Tavaris No Yes

Explanation / Answer

Market Price 21.00 Variable Cost 9.70 Fixed Cost 5.50 Total Cost 15.20 Requirement 15000 Capacity(90000) Full Capcity 1 At Full Product Cost: 15.20 Per Unit Alamosa No Since Active market available Tavaris Yes 2 At Full Product Cost+25% At Full Product Cost: 15.2 Add: Margin 3.8 Transfer Price 19.00 Alamosa No Since It can have more profit by selling in external market Tavaris Yes 3 VC Plus FC 2 Variable Cost 9.70 Fixed Cost 2.00 Transfer Price 11.70 Alamosa No Since It can have more profit by selling in external market Tavaris Yes 4 Capacity 90000 Market available 65000 Idle Capacity 25000 Minimum Transfer Price: Alamosa Only VC Cost Minimum Transfer Price: 9.70 (Since Idle Capacity is available) Maximum Transfer Price: Tavaris 21.00 (Price in External Market)

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.