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Oberley Products, Inc., has a Receiver Division that manufactures and sells a number of products, including a standard receiver that could be used by another division in the company, the Industrial Products Division, in one of its products. Data concerning that receiver appear below: Oberley Products, Inc., has a Receiver Division that manufactures and sells a number of products, including a standard receiver that could be used by another division in the company, the Industrial Products Division, in one of its products. Data concerning that receiver appear below: The Industrial Products Division is currently purchasing 5,000 of these receivers per year from an overseas supplier at a cost of $58 per receiver. What is the maximum price that the Industrial Products Division should be willing to pay for receivers transferred from the Receiver Division? A) $52 per unit B) $19 per unit C) $58 per unit D) $33 per unit The Industrial Products Division is currently purchasing 5,000 of these receivers per year from an overseas supplier at a cost of $58 per receiver. What is the maximum price that the Industrial Products Division should be willing to pay for receivers transferred from the Receiver Division?


A) $52 per unit
B) $19 per unit
C) $58 per unit
D) $33 per unit

E) B) and D)
F) A) and D)

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Fingado Products, Inc., has a Detector Division that manufactures and sells a number of products, including a standard detector that could be used by another division in the company, the Commercial Security Division, in one of its products. Data concerning that detector appear below: Fingado Products, Inc., has a Detector Division that manufactures and sells a number of products, including a standard detector that could be used by another division in the company, the Commercial Security Division, in one of its products. Data concerning that detector appear below: The Commercial Security Division is currently purchasing 6,000 of these detectors per year from an overseas supplier at a cost of $91 per detector. What is the maximum price that the Commercial Security Division should be willing to pay for detectors transferred from the Detector Division? A) $83 per unit B) $51 per unit C) $91 per unit D) $32 per unit The Commercial Security Division is currently purchasing 6,000 of these detectors per year from an overseas supplier at a cost of $91 per detector. What is the maximum price that the Commercial Security Division should be willing to pay for detectors transferred from the Detector Division?


A) $83 per unit
B) $51 per unit
C) $91 per unit
D) $32 per unit

E) B) and C)
F) None of the above

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Cichy Products, Inc., has a Valve Division that manufactures and sells a number of products, including a standard valve that could be used by another division in the company, the Pump Division, in one of its products. Data concerning that valve appear below: Cichy Products, Inc., has a Valve Division that manufactures and sells a number of products, including a standard valve that could be used by another division in the company, the Pump Division, in one of its products. Data concerning that valve appear below: The Pump Division is currently purchasing 5,000 of these valves per year from an overseas supplier at a cost of $85 per valve. What is the maximum price that the Pump Division should be willing to pay for valves transferred from the Valve Division? A) $37 per unit B) $85 per unit C) $32 per unit D) $69 per unit The Pump Division is currently purchasing 5,000 of these valves per year from an overseas supplier at a cost of $85 per valve. What is the maximum price that the Pump Division should be willing to pay for valves transferred from the Valve Division?


A) $37 per unit
B) $85 per unit
C) $32 per unit
D) $69 per unit

E) A) and B)
F) B) and D)

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Rohrer Products, Inc., has a Motor Division that manufactures and sells a number of products, including a standard motor that could be used by another division in the company, the Automotive Division, in one of its products. Data concerning that motor appear below: Rohrer Products, Inc., has a Motor Division that manufactures and sells a number of products, including a standard motor that could be used by another division in the company, the Automotive Division, in one of its products. Data concerning that motor appear below: The Automotive Division is currently purchasing 10,000 of these motors per year from an overseas supplier at a cost of $88 per motor. Assume that the Motor Division has enough idle capacity to handle all of the Automotive Division's needs. What should be the minimum acceptable transfer price for the motors from the standpoint of the Motor Division? A) $65 per unit B) $88 per unit C) $41 per unit D) $95 per unit The Automotive Division is currently purchasing 10,000 of these motors per year from an overseas supplier at a cost of $88 per motor. Assume that the Motor Division has enough idle capacity to handle all of the Automotive Division's needs. What should be the minimum acceptable transfer price for the motors from the standpoint of the Motor Division?


A) $65 per unit
B) $88 per unit
C) $41 per unit
D) $95 per unit

E) C) and D)
F) A) and B)

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Wamsley Products, Inc., has a Transmitter Division that manufactures and sells a number of products, including a standard transmitter that could be used by another division in the company, the Remote Devices Division, in one of its products. Data concerning that transmitter appear below: Wamsley Products, Inc., has a Transmitter Division that manufactures and sells a number of products, including a standard transmitter that could be used by another division in the company, the Remote Devices Division, in one of its products. Data concerning that transmitter appear below: The Remote Devices Division is currently purchasing 8,000 of these transmitters per year from an overseas supplier at a cost of $61 per transmitter. Assume that the Transmitter Division is selling all of the transmitters it can produce to outside customers. What should be the minimum acceptable transfer price for the transmitters from the standpoint of the Transmitter Division? A) $44 per unit B) $27 per unit C) $64 per unit D) $61 per unit The Remote Devices Division is currently purchasing 8,000 of these transmitters per year from an overseas supplier at a cost of $61 per transmitter. Assume that the Transmitter Division is selling all of the transmitters it can produce to outside customers. What should be the minimum acceptable transfer price for the transmitters from the standpoint of the Transmitter Division?


A) $44 per unit
B) $27 per unit
C) $64 per unit
D) $61 per unit

E) A) and D)
F) A) and C)

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When a dispute arises over a transfer price, top managers should intervene to keep divisional managers from making a costly mistake, even though the divisions are evaluated as profit centers.

A) True
B) False

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Ebbs Products, Inc., has a Motor Division that manufactures and sells a number of products, including a standard motor. Data concerning that motor appear below: Ebbs Products, Inc., has a Motor Division that manufactures and sells a number of products, including a standard motor. Data concerning that motor appear below: The Automotive Division of Ebbs Products, Inc needs 9,000 special heavy-duty motors per year. The Motor Division's variable cost to manufacture and ship this special motor would be $46 per unit. Because these special motors require more manufacturing resources than the standard motor, the Motor Division would have to reduce its production and sales of standard motors to outside customers from 86,000 units per year to 72,500 units per year. From the standpoint of the Motor Division, what is the minimal acceptable transfer price for the special motors for the Automotive Division? A) $84.00 per unit B) $103.00 per unit C) $81.00 per unit D) $64.00 per unit The Automotive Division of Ebbs Products, Inc needs 9,000 special heavy-duty motors per year. The Motor Division's variable cost to manufacture and ship this special motor would be $46 per unit. Because these special motors require more manufacturing resources than the standard motor, the Motor Division would have to reduce its production and sales of standard motors to outside customers from 86,000 units per year to 72,500 units per year. From the standpoint of the Motor Division, what is the minimal acceptable transfer price for the special motors for the Automotive Division?


A) $84.00 per unit
B) $103.00 per unit
C) $81.00 per unit
D) $64.00 per unit

E) A) and B)
F) All of the above

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Royal Products, Inc., has a Connector Division that manufactures and sells a number of products, including a standard connector that could be used by another division in the company, the Transmission Division, in one of its products. Data concerning that connector appear below: Royal Products, Inc., has a Connector Division that manufactures and sells a number of products, including a standard connector that could be used by another division in the company, the Transmission Division, in one of its products. Data concerning that connector appear below: The Transmission Division is currently purchasing 6,000 of these connectors per year from an overseas supplier at a cost of $65 per connector. Assume that the Connector Division is selling all of the connectors it can produce to outside customers. What should be the minimum acceptable transfer price for the connectors from the standpoint of the Connector Division? A) $56 per unit B) $65 per unit C) $69 per unit D) $21 per unit The Transmission Division is currently purchasing 6,000 of these connectors per year from an overseas supplier at a cost of $65 per connector. Assume that the Connector Division is selling all of the connectors it can produce to outside customers. What should be the minimum acceptable transfer price for the connectors from the standpoint of the Connector Division?


A) $56 per unit
B) $65 per unit
C) $69 per unit
D) $21 per unit

E) B) and C)
F) A) and C)

Correct Answer

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Germano Products, Inc., has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below: Germano Products, Inc., has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below: The Pool Products Division is currently purchasing 10,000 of these pumps per year from an overseas supplier at a cost of $94 per pump. Assume that the Pump Division has enough idle capacity to handle all of the Pool Products Division's needs. Does there exist a transfer price that would make both the Pump and Pool Products Division financially better off than if the Pool Products Division were to continue buying its pumps from the outside supplier? A) Yes, both divisions are always better off regardless of whether the selling division has enough idle capacity to handle all of the buying division's needs. B) Yes, the minimum transfer price that the selling division should be willing to accept is less than the maximum transfer price that the buying division would accept. C) The answer cannot be determined from the information that has been provided. D) No, the selling division's price to outside customers is higher than the price that the buying division has to pay its outside supplier. The Pool Products Division is currently purchasing 10,000 of these pumps per year from an overseas supplier at a cost of $94 per pump. Assume that the Pump Division has enough idle capacity to handle all of the Pool Products Division's needs. Does there exist a transfer price that would make both the Pump and Pool Products Division financially better off than if the Pool Products Division were to continue buying its pumps from the outside supplier?


A) Yes, both divisions are always better off regardless of whether the selling division has enough idle capacity to handle all of the buying division's needs.
B) Yes, the minimum transfer price that the selling division should be willing to accept is less than the maximum transfer price that the buying division would accept.
C) The answer cannot be determined from the information that has been provided.
D) No, the selling division's price to outside customers is higher than the price that the buying division has to pay its outside supplier.

E) None of the above
F) A) and B)

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Division P of the Nyers Company makes a part that can either be sold to outside customers or transferred internally to Division Q for further processing. Annual data relating to this part are as follows: Division P of the Nyers Company makes a part that can either be sold to outside customers or transferred internally to Division Q for further processing. Annual data relating to this part are as follows: Division Q of the Nyers Company requires 15,000 units per year and is currently paying an outside supplier $33 per unit. Consider each part below independently. If outside customers demand only 50,000 units per year, then according to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division? A) $35 per unit B) $33 per unit C) $28 per unit D) $23 per unit Division Q of the Nyers Company requires 15,000 units per year and is currently paying an outside supplier $33 per unit. Consider each part below independently. If outside customers demand only 50,000 units per year, then according to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division?


A) $35 per unit
B) $33 per unit
C) $28 per unit
D) $23 per unit

E) A) and C)
F) All of the above

Correct Answer

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Ahart Products, Inc., has a Transmitter Division that manufactures and sells a number of products, including a standard transmitter that could be used by another division in the company, the Remote Devices Division, in one of its products. Data concerning that transmitter appear below: Ahart Products, Inc., has a Transmitter Division that manufactures and sells a number of products, including a standard transmitter that could be used by another division in the company, the Remote Devices Division, in one of its products. Data concerning that transmitter appear below: The Remote Devices Division is currently purchasing 4,000 of these transmitters per year from an overseas supplier at a cost of $59 per transmitter. Assume that the Valve Division is selling all of the valves it can produce to outside customers. Also assume that $3 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What should be the minimum acceptable transfer price for the valves from the standpoint of the Valve Division? A) $59 per unit B) $61 per unit C) $47 per unit D) $58 per unit The Remote Devices Division is currently purchasing 4,000 of these transmitters per year from an overseas supplier at a cost of $59 per transmitter. Assume that the Valve Division is selling all of the valves it can produce to outside customers. Also assume that $3 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What should be the minimum acceptable transfer price for the valves from the standpoint of the Valve Division?


A) $59 per unit
B) $61 per unit
C) $47 per unit
D) $58 per unit

E) All of the above
F) B) and C)

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Ganus Products, Inc., has a Relay Division that manufactures and sells a number of products, including a standard relay that could be used by another division in the company, the Electronics Division, in one of its products. Data concerning that relay appear below: Ganus Products, Inc., has a Relay Division that manufactures and sells a number of products, including a standard relay that could be used by another division in the company, the Electronics Division, in one of its products. Data concerning that relay appear below: The Electronics Division is currently purchasing 7,000 of these relays per year from an overseas supplier at a cost of $59 per relay. Assume that the Relay Division is selling all of the relays it can produce to outside customers. Does there exist a transfer price that would make both the Relay and Electronics Division financially better off than if the Electronics Division were to continue buying its relays from the outside supplier? A) Yes, the minimum transfer price that the selling division should be willing to accept is less than the maximum transfer price that the buying division should be willing to accept. B) No, the minimum transfer price that the selling division should be willing to accept exceeds the maximum transfer price that the buying division should be willing to accept. C) Yes, both divisions are always better off regardless of whether the selling division has enough idle capacity to handle all of the buying division's needs. D) The answer cannot be determined from the information that has been provided. The Electronics Division is currently purchasing 7,000 of these relays per year from an overseas supplier at a cost of $59 per relay. Assume that the Relay Division is selling all of the relays it can produce to outside customers. Does there exist a transfer price that would make both the Relay and Electronics Division financially better off than if the Electronics Division were to continue buying its relays from the outside supplier?


A) Yes, the minimum transfer price that the selling division should be willing to accept is less than the maximum transfer price that the buying division should be willing to accept.
B) No, the minimum transfer price that the selling division should be willing to accept exceeds the maximum transfer price that the buying division should be willing to accept.
C) Yes, both divisions are always better off regardless of whether the selling division has enough idle capacity to handle all of the buying division's needs.
D) The answer cannot be determined from the information that has been provided.

E) B) and D)
F) B) and C)

Correct Answer

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Wetherald Products, Inc., has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below: Wetherald Products, Inc., has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below: The Pool Products Division is currently purchasing 4,000 of these pumps per year from an overseas supplier at a cost of $74 per pump. Assume that the Valve Division is selling all of the valves it can produce to outside customers. Also assume that $5 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What should be the minimum acceptable transfer price for the valves from the standpoint of the Valve Division? A) $77 per unit B) $74 per unit C) $59 per unit D) $82 per unit The Pool Products Division is currently purchasing 4,000 of these pumps per year from an overseas supplier at a cost of $74 per pump. Assume that the Valve Division is selling all of the valves it can produce to outside customers. Also assume that $5 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What should be the minimum acceptable transfer price for the valves from the standpoint of the Valve Division?


A) $77 per unit
B) $74 per unit
C) $59 per unit
D) $82 per unit

E) None of the above
F) A) and D)

Correct Answer

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Ahart Products, Inc., has a Transmitter Division that manufactures and sells a number of products, including a standard transmitter that could be used by another division in the company, the Remote Devices Division, in one of its products. Data concerning that transmitter appear below: Ahart Products, Inc., has a Transmitter Division that manufactures and sells a number of products, including a standard transmitter that could be used by another division in the company, the Remote Devices Division, in one of its products. Data concerning that transmitter appear below: The Remote Devices Division is currently purchasing 4,000 of these transmitters per year from an overseas supplier at a cost of $59 per transmitter. What is the maximum price that the Remote Devices Division should be willing to pay for transmitters transferred from the Transmitter Division? A) $8 per unit B) $50 per unit C) $59 per unit D) $42 per unit The Remote Devices Division is currently purchasing 4,000 of these transmitters per year from an overseas supplier at a cost of $59 per transmitter. What is the maximum price that the Remote Devices Division should be willing to pay for transmitters transferred from the Transmitter Division?


A) $8 per unit
B) $50 per unit
C) $59 per unit
D) $42 per unit

E) C) and D)
F) B) and D)

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The Southern Division of Barstol Company makes and sells a single product, which is a part used in manufacturing trucks. The annual production capacity is 12,000 units and the variable cost of each unit is $35. Presently the Southern Division sells 11,000 units per year to outside customers at $49 per unit. The Northern Division of Barstol Company would like to buy 4,000 units a year from Southern to use in its production. There would be no savings in variable costs from transferring the units internally rather than selling them externally. The lowest acceptable transfer price from the standpoint of the Southern Division should be closest to:


A) $45.50 per unit
B) $35.00 per unit
C) $32.00 per unit
D) $49.00 per unit

E) A) and B)
F) A) and C)

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Creaser Products, Inc., has a Sensor Division that manufactures and sells a number of products, including a standard sensor. Data concerning that sensor appear below: Creaser Products, Inc., has a Sensor Division that manufactures and sells a number of products, including a standard sensor. Data concerning that sensor appear below: The company has a Safety Products Division that could use this sensor in one of its products. The Safety Products Division is currently purchasing 8,000 of these sensors per year from an overseas supplier at a cost of $76 per sensor. Required: The Sensor Division is selling all of the sensors it can produce to outside customers. Also assume that $10 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What is the acceptable range, if any, for the transfer price between the two divisions? The company has a Safety Products Division that could use this sensor in one of its products. The Safety Products Division is currently purchasing 8,000 of these sensors per year from an overseas supplier at a cost of $76 per sensor. Required: The Sensor Division is selling all of the sensors it can produce to outside customers. Also assume that $10 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What is the acceptable range, if any, for the transfer price between the two divisions?

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The total contribution margin on lost sa...

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Division A makes a part with the following characteristics: Division A makes a part with the following characteristics: Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $24 each. Suppose that Division A is operating at capacity and can sell all of its output to outside customers at its usual selling price. If Division A agrees to sell the parts to Division B at $24 per unit, the company as a whole will be: A) better off by $5,000 each period. B) worse off by $15,000 each period. C) worse off by $5,000 each period. D) There will be no change in the profits of the company as a whole. Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $24 each. Suppose that Division A is operating at capacity and can sell all of its output to outside customers at its usual selling price. If Division A agrees to sell the parts to Division B at $24 per unit, the company as a whole will be:


A) better off by $5,000 each period.
B) worse off by $15,000 each period.
C) worse off by $5,000 each period.
D) There will be no change in the profits of the company as a whole.

E) B) and C)
F) A) and D)

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Koppenhaver Products, Inc., has a Relay Division that manufactures and sells a number of products, including a standard relay that could be used by another division in the company, the Electronics Division, in one of its products. Data concerning that relay appear below: Koppenhaver Products, Inc., has a Relay Division that manufactures and sells a number of products, including a standard relay that could be used by another division in the company, the Electronics Division, in one of its products. Data concerning that relay appear below: The Electronics Division is currently purchasing 15,000 of these relays per year from an overseas supplier at a cost of $57 per relay. Assume that the Valve Division is selling all of the valves it can produce to outside customers. Also assume that $10 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What should be the minimum acceptable transfer price for the valves from the standpoint of the Valve Division? A) $57 per unit B) $41 per unit C) $53 per unit D) $63 per unit The Electronics Division is currently purchasing 15,000 of these relays per year from an overseas supplier at a cost of $57 per relay. Assume that the Valve Division is selling all of the valves it can produce to outside customers. Also assume that $10 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What should be the minimum acceptable transfer price for the valves from the standpoint of the Valve Division?


A) $57 per unit
B) $41 per unit
C) $53 per unit
D) $63 per unit

E) A) and B)
F) A) and C)

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Manni Products, Inc., has a Pump Division that manufactures and sells a number of products, including a standard pump. Data concerning that pump appear below: Manni Products, Inc., has a Pump Division that manufactures and sells a number of products, including a standard pump. Data concerning that pump appear below: The company has a Pool Products Division that needs 7,000 special heavy-duty pumps per year. The Pump Division's variable cost to manufacture and ship this special pump would be $43 per unit. Making these special pumps would require more manufacturing resources. Therefore, the Pump Division would have to reduce its production and sales of regular pumps to outside customers from 68,000 units per year to 56,100 units per year. Required: As far as the Pump Division is concerned, what is the lowest acceptable transfer price for the special pumps? The company has a Pool Products Division that needs 7,000 special heavy-duty pumps per year. The Pump Division's variable cost to manufacture and ship this special pump would be $43 per unit. Making these special pumps would require more manufacturing resources. Therefore, the Pump Division would have to reduce its production and sales of regular pumps to outside customers from 68,000 units per year to 56,100 units per year. Required: As far as the Pump Division is concerned, what is the lowest acceptable transfer price for the special pumps?

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To produce the 7,000 special pumps, the ...

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Fois Company has two divisions, Division X and Division Y. Division X has a production capacity of 5,000 units of a particular part per month. Division X sells 4,400 units of the part each month to outside customers at a contribution margin of $56 per unit. Division Y would like to buy 800 units of the part each month from Division X. In computing the lowest acceptable transfer price from the perspective of the selling division, the lost contribution margin per unit portion of the transfer price computation would be:


A) $56.00 per unit
B) $30.00 per unit
C) $14.00 per unit
D) $25.00 per unit

E) B) and C)
F) All of the above

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