Deck 26: Transfer Pricing

Question 1

The transfer price used for internal transfers between divisions of the same company cannot affect the divisions' reported profits.

Answer 1

False

Question 2

The selling division in a transfer pricing situation should want the transfer price to cover at least the full cost per unit plus the lost contribution margin per unit on outside sales.

Answer 2

False

Question 3

Nanke Products,Inc.,has a Sensor Division that manufactures and sells a number of products,including a standard sensor that could be used by another division in the company,the Safety Products Division,in one of its products.Data concerning that sensor appear below:
The Safety Products Division is currently purchasing 3,000 of these sensors per year from an overseas supplier at a cost of $59 per sensor.
Assume that the Sensor Division is selling all of the sensors it can produce to outside customers.What should be the minimum acceptable transfer price for the sensors from the standpoint of the Sensor Division?

A) $37 per unit
B) $59 per unit
C) $20 per unit
D) $64 per unit

Answer 3

D
Explanation:
The total contribution margin on lost sales is computed as follows:
From the perspective of the selling division, profits would increase as a result of the transfer if and only if:
Transfer price > Variable cost per unit + (Total contribution margin on lost sales ÷ Number of units transferred)
Transfer price > $20 per unit + ($132,000 ÷ 3,000 units) = $20 per unit + $44 per unit = $64 per unit

Question 4

From the buying division's perspective,when a transferred item can be purchased from an outside supplier,the price charged by the outside supplier represents an upper bound on the charge that should be made on transfers between the selling and buying divisions.

Question 5

Setting transfer prices at full cost can lead to bad decisions because,among other reasons,full cost does not take into account opportunity costs.

Question 6

Mittan Products,Inc.,has a Antennae Division that manufactures and sells a number of products,including a standard antennae that could be used by another division in the company,the Aircraft Products Division,in one of its products.Data concerning that antennae appear below:
The Aircraft Products Division is currently purchasing 4,000 of these antennaes per year from an overseas supplier at a cost of $66 per antennae.
Assume that the Valve Division is selling all of the valves it can produce to outside customers.From the standpoint of the Valve Division,what is the lost contribution margin if the valves are transferred internally rather than sold to outside customers?

A) $48,000
B) $136,000
C) $2,312,000
D) $152,000

Question 7

Whenever the selling division must give up outside sales in order to sell internally,it has an opportunity cost that should be considered in setting the transfer price.

Question 8

Division Delta of Golvin Corporation makes and sells a single product which is used by manufacturers of fork lift trucks.Presently it sells 9,000 units per year to outside customers at $57 per unit.The annual capacity is 10,000 units and the variable cost to make each unit is $32.Division Echo of Golvin Corporation would like to buy 2,000 units a year from Division Delta to use in its products.There would be no cost savings from transferring the units within the company rather than selling them on the outside market.What should be the lowest acceptable transfer price from the perspective of Division Delta?

A) $57.00 per unit
B) $19.50 per unit
C) $34.50 per unit
D) $32.00 per unit

Question 9

If transfer prices are to be based on cost,then the costs should be actual costs rather than standard costs.

Question 10

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

Question 11

Division G makes a part that it sells to customers outside of the company.Data concerning this part appear below:
Division H of the same company would like to use the part manufactured by Division G in one of its products.Division H currently purchases a similar part made by an outside company for $83 per unit and would substitute the part made by Division G.Division H requires 500 units of the part each period.Division G has ample capacity to produce the units for Division H without any increase in fixed costs and without cutting into sales to outside customers.If Division G sells to Division H rather than to outside customers,the variable cost be unit would be $2 lower.What should be the lowest acceptable transfer price from the perspective of Division G?

A) $47
B) $87
C) $83
D) $57

Question 12

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.

Question 13

Toldness 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 11,000 of these connectors per year from an overseas supplier at a cost of $58 per connector.
What is the maximum price that the Transmission Division should be willing to pay for connectors transferred from the Connector Division?

A) $51 per unit
B) $58 per unit
C) $22 per unit
D) $29 per unit

Question 14

Division E of Harveq Company has the capacity for making 6,000 motors per month and regularly sells 5,400 motors each month to outside customers at a contribution margin of $54 per motor.The variable cost per motor is $41.Division F of Harveq Company would like to obtain 900 motors each month from Division E.What should be the lowest acceptable transfer price from the perspective of Division E?

A) $59.00 per unit
B) $54.00 per unit
C) $41.00 per unit
D) $18.00 per unit

Question 15

Using the formula in the text,if the lowest acceptable transfer price from the viewpoint of the selling division is $75 and the opportunity cost per unit on outside sales is $24,then the variable cost per unit must be:

A) $24 per unit
B) $99 per unit
C) $51 per unit
D) $75 per unit

Question 16

The Northern Division of Fiscar Corporation sells Part X2 to other companies for $87.20 per unit.According to the company's cost accounting system,the costs to Northern Division to make a unit of Part X2 are:
The Southern Division of Fiscar Corporation uses a part much like Part X2 in one of its products.The Southern Division can buy this part from an outside supplier for $79.95 per unit.However,the Southern Division could use Part X2 instead of this part that it purchases from outside suppliers.What is the most that the Southern Division would be willing to pay the Northern Division for Part X2?

A) $87.20 per unit
B) $62.60 per unit
C) $58.10 per unit
D) $79.95 per unit

Question 17

Blitch Products,Inc.,has a Screen Division that manufactures and sells a number of products,including a standard screen that could be used by another division in the company,the Home Security Division,in one of its products.Data concerning that screen appear below:
The Home Security Division is currently purchasing 2,000 of these screens per year from an overseas supplier at a cost of $50 per screen.
Assume that the Screen Division has enough idle capacity to handle all of the Home Security Division's needs.Does there exist a transfer price that would make both the Screen and Home Security Division financially better off than if the Home Security Division were to continue buying its screens 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) The answer cannot be determined from the information that has been provided.
C) 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.
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.

Question 18

Godina 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 10,000 of these receivers per year from an overseas supplier at a cost of $81 per receiver.
Assume that the Receiver Division is selling all of the receivers it can produce to outside customers.Does there exist a transfer price that would make both the Receiver and Industrial Products Division financially better off than if the Industrial Products Division were to continue buying its receivers 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 should be willing to accept.
C) The answer cannot be determined from the information that has been provided.
D) 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.

Question 19

Wengert 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 Wengert Products,Inc needs 8,000 special heavy-duty motors per year.The Motor Division's variable cost to manufacture and ship this special motor would be $20 per unit.Because these special motors would requires 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 40,000 units per year to 27,200 units per year.
What is the total contribution margin on sales to outside customers that the Motor Division would give up if it were to make the special motors for the Automotive Division?

A) $336,000
B) $537,600
C) $860,160
D) $755,200

Question 20

Lumpkins 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 9,000 of these valves per year from an overseas supplier at a cost of $59 per valve.
Assume that the Valve Division is selling all of the valves it can produce to outside customers.Also assume that none of the variable expenses can be avoided on transfers within the company.What should be the minimum acceptable transfer price for the valves from the standpoint of the Valve Division?

A) $50 per unit
B) $62 per unit
C) $62 per unit
D) $59 per unit

Question 21

Siegrist 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 12,000 of these pumps per year from an overseas supplier at a cost of $54 per pump.
Assume that the Pump Division has enough idle capacity to handle all of the Pool Products Division's needs.What should be the minimum acceptable transfer price for the pumps from the standpoint of the Pump Division?

A) $47 per unit
B) $60 per unit
C) $36 per unit
D) $54 per unit

Question 22

(Appendix 11A) Stokan Products, Inc., has a Antennae Division that manufactures and sells a number of products, including a standard antennae that could be used by another division in the company, the Aircraft Products Division, in one of its products. Data concerning that antennae appear below:
The Aircraft Products Division is currently purchasing 5,000 of these antennaes per year from an overseas supplier at a cost of $57 per antennae.
Assume that the Antennae Division is selling all of the antennaes it can produce to outside customers.What should be the minimum acceptable transfer price for the antennaes from the standpoint of the Antennae Division?

A) $40 per unit
B) $63 per unit
C) $57 per unit
D) $22 per unit

Question 23

Division R of Harris Corporation has the capacity for making 40,000 wheel sets per year and regularly sells 36,000 each year on the outside market.The regular selling price on the outside market is $89 per wheel set,and the variable production cost per unit is $56.Division S of Harris Corporation currently buys 6,000 wheel sets (of the kind made by Division R)yearly from an outside supplier at a price of $85 per wheel set.If Division S were to buy the 6,000 wheel sets it needs annually from Division R at $83 per wheel set,the change in annual net operating income for the company as a whole,compared to what it is currently,would be:

A) $108,000
B) $174,000
C) $162,000
D) $96,000

Question 24

The Parts Division of Nydron Corporation makes Part Y6P,which it sells to outside companies for $17.00 per unit.According to the cost accounting system,the costs of making one unit of Part Y6P consist of $7.00 for direct materials,$3.00 for direct labor,$4.50 for variable manufacturing overhead,and $1.20 for fixed manufacturing overhead.The Parts Division has enough idle capacity to make 1,000 units of Part Y6P each month.The Assembly Division of Nydron Corporation can use Part Y6P in one of its products.At present,the Assembly Division is purchasing an equivalent part from an outside supplier for $16.85 per unit.The Assembly Division needs 2,000 units of the part each month.It has been suggested that the Assembly Division buy Part Y6P from the Parts Division instead of buying the equivalent part from the outside supplier.The transfer price for this transaction would lie within what limits?

A) equal to or greater than $15.75 and less than or equal to $16.85
B) equal to or greater than $15.70 and less than or equal to $17.00
C) equal to or greater than $14.50 and less than or equal to $17.00
D) equal to or greater than $14.50 and less than or equal to $16.85

Question 25

Delemos Products,Inc.,has a Transmitter Division that manufactures and sells a number of products,including a standard transmitter.Data concerning that transmitter appear below:
The Remote Devices Division of Delemos Products,Inc needs 6,000 special heavy-duty transmitters per year.The Transmitter Division's variable cost to manufacture and ship this special transmitter would be $66 per unit.Because these special transmitters would requires more manufacturing resources than the standard transmitter,the Transmitter Division would have to reduce its production and sales of standard transmitters to outside customers from 83,000 units per year to 76,400 units per year.
From the standpoint of the Transmitter Division,what is the minimal acceptable transfer price for the special transmitters for the Remote Devices Division?

A) $90.00 per unit
B) $98.00 per unit
C) $104.00 per unit
D) $107.80 per unit

Question 26

Tron 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 $94 per pump.
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.Does there exist a transfer price that would make both the Valve and Pump Division financially better off than if the Pump Division were to continue buying its valves from the outside supplier?

A) The answer cannot be determined from the information that has been provided.
B) No, the minimum transfer price that the selling division should be willing to accept exceeds the maximum transfer price that the buying division would 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) 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.

Question 27

Wigelsworth 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 Safety Products Division of Wigelsworth Products,Inc needs 6,000 special heavy-duty sensors per year.The Sensor Division's variable cost to manufacture and ship this special sensor would be $32 per unit.Because these special sensors would requires more manufacturing resources than the standard sensor,the Sensor Division would have to reduce its production and sales of standard sensors to outside customers from 89,000 units per year to 79,400 units per year.
From the standpoint of the Sensor Division,what is the minimal acceptable transfer price for the special sensors for the Safety Products Division?

A) $60.00 per unit
B) $67.00 per unit
C) $69.00 per unit
D) $91.20 per unit

Question 28

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

Question 29

(Appendix 11A) Stokan Products, Inc., has a Antennae Division that manufactures and sells a number of products, including a standard antennae that could be used by another division in the company, the Aircraft Products Division, in one of its products. Data concerning that antennae appear below:
The Aircraft Products Division is currently purchasing 5,000 of these antennaes per year from an overseas supplier at a cost of $57 per antennae.
Assume that the Valve Division is selling all of the valves it can produce to outside customers.Also assume that $7 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) $33 per unit
B) $63 per unit
C) $56 per unit
D) $57 per unit

Question 30

(Appendix 11A) Division S of Kracker Company makes a part that it sells to other companies. Data on that part appear below:
Division B, another division of Kracker Company, presently is purchasing 10,000 units of a similar product each period from an outside supplier for $28 per unit, but would like to begin purchasing from Division S.
Suppose that Division S has ample idle capacity to handle all of Division B's needs without any increase in fixed costs or cutting into sales to outside customers.If Division S refuses to accept a transfer price of $28 or less and Division B continues to buy from the outside supplier,the company as a whole will:

A) gain $20,000 in potential profit.
B) lose $60,000 in potential profit.
C) lose $70,000 in potential profit.
D) lose $20,000 in potential profit.

Question 31

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

Question 32

(Appendix 11A) Stokan Products, Inc., has a Antennae Division that manufactures and sells a number of products, including a standard antennae that could be used by another division in the company, the Aircraft Products Division, in one of its products. Data concerning that antennae appear below:
The Aircraft Products Division is currently purchasing 5,000 of these antennaes per year from an overseas supplier at a cost of $57 per antennae.
What is the maximum price that the Aircraft Products Division should be willing to pay for antennaes transferred from the Antennae Division?

A) $22 per unit
B) $57 per unit
C) $18 per unit
D) $40 per unit

Question 33

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

Question 34

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

Question 35

(Appendix 11A) Division S of Kracker Company makes a part that it sells to other companies. Data on that part appear below:
Division B, another division of Kracker Company, presently is purchasing 10,000 units of a similar product each period from an outside supplier for $28 per unit, but would like to begin purchasing from Division S.
Suppose that Division S can sell all that it can produce to outside customers.If Division S sells to Division B at a price of $28 per unit,the company as a whole will be:

A) worse off by $80,000 each period.
B) worse off by $70,000 each period.
C) better off by $20,000 each period.
D) worse off by $20,000 each period.

Question 36

Meers 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 7,000 of these detectors per year from an overseas supplier at a cost of $93 per detector.
Assume that the Valve Division is selling all of the valves it can produce to outside customers.From the standpoint of the Valve Division,what is the lost contribution margin if the valves are transferred internally rather than sold to outside customers?

A) $133,000
B) $469,000
C) $2,537,000
D) $413,000

Question 37

Ricardo 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 Ricardo Products,Inc needs 10,000 special heavy-duty motors per year.The Motor Division's variable cost to manufacture and ship this special motor would be $35 per unit.Because these special motors would requires 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 87,000 units per year to 69,000 units per year.
What is the total contribution margin on sales to outside customers that the Motor Division would give up if it were to make the special motors for the Automotive Division?

A) $486,000
B) $874,800
C) $1,026,000
D) $270,000

Question 38

Leneau 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 12,000 of these connectors per year from an overseas supplier at a cost of $52 per connector.
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.Does there exist a transfer price that would make both the Valve and Pump Division financially better off than if the Pump Division were to continue buying its valves 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 would accept. Both divisions would be financially better off if the transfers were to take place.
B) 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.
C) No, the selling division's price to outside customers is higher than the price that the buying division has to pay its outside supplier.
D) The answer cannot be determined from the information that has been provided.

Question 39

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

Question 40

Division C makes a part that it sells to customers outside of the company.Data concerning this part appear below:
Division D of the same company would like to use the part manufactured by Division C in one of its products.Division D currently purchases a similar part made by an outside company for $79 per unit and would substitute the part made by Division C.Division D requires 1,000 units of the part each period.Division C has ample excess capacity to handle all of Division D's needs without any increase in fixed costs and without cutting into outside sales.According to the formula in the text,what is the lowest acceptable transfer price from the standpoint of the selling division?

A) $75
B) $79
C) $54
D) $69

Question 41

(Appendix 11A) Bacot 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 8,000 of these valves per year from an overseas supplier at a cost of $47 per valve.
Assume that the Valve Division has enough idle capacity to handle all of the Pump Division's needs.What should be the minimum acceptable transfer price for the valves from the standpoint of the Valve Division?

A) $45 per unit
B) $28 per unit
C) $47 per unit
D) $53 per unit

Question 42

(Appendix 11A) Zeilinger Products, Inc., has a Screen Division that manufactures and sells a number of products, including a standard screen that could be used by another division in the company, the Home Security Division, in one of its products. Data concerning that screen appear below:
The Home Security Division is currently purchasing 8,000 of these screens per year from an overseas supplier at a cost of $58 per screen.
What is the maximum price that the Home Security Division should be willing to pay for screens transferred from the Screen Division?

A) $58 per unit
B) $26 per unit
C) $28 per unit
D) $54 per unit

Question 43

(Appendix 11A) Fregozo 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 8,000 of these connectors per year from an overseas supplier at a cost of $45 per connector.
Assume that the Connector Division has enough idle capacity to handle all of the Transmission Division's needs.What should be the minimum acceptable transfer price for the connectors from the standpoint of the Connector Division?

A) $54 per unit
B) $20 per unit
C) $41 per unit
D) $45 per unit

Question 44

(Appendix 11A) Brull 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 Safety Products Division of Brull Products, Inc needs 6,000 special heavy-duty sensors per year. The Sensor Division's variable cost to manufacture and ship this special sensor would be $60 per unit. Because these special sensors would requires more manufacturing resources than the standard sensor, the Sensor Division would have to reduce its production and sales of standard sensors to outside customers from 56,000 units per year to 46,400 units per year.
What is the total contribution margin on sales to outside customers that the Sensor Division would give up if it were to make the special sensors for the Safety Products Division?

A) $720,000
B) $353,280
C) $220,800
D) $138,000

Question 45

(Appendix 11A) 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 has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into sales to outside customers.If Division A refuses to accept the $24 price internally and Division B continues to buy from the outside supplier,the company as a whole will be:

A) worse off by $30,000 each period.
B) worse off by $10,000 each period.
C) better off by $15,000 each period.
D) worse off by $35,000 each period.

Question 46

(Appendix 11A) Fregozo 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 8,000 of these connectors per year from an overseas supplier at a cost of $45 per connector.
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) $31 per unit
B) $54 per unit
C) $44 per unit
D) $45 per unit

Question 47

(Appendix 11A) 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 is selling all of the pumps it can produce to outside customers.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 should be willing to accept.
C) The answer cannot be determined from the information that has been provided.
D) 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.

Question 48

(Appendix 11A) 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.

Question 49

(Appendix 11A) Bacot 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 8,000 of these valves per year from an overseas supplier at a cost of $47 per valve.
What is the maximum price that the Pump Division should be willing to pay for valves transferred from the Valve Division?

A) $45 per unit
B) $28 per unit
C) $47 per unit
D) $17 per unit

Question 50

(Appendix 11A) 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 has enough idle capacity to handle all of the Transmission Division's needs.What should be the minimum acceptable transfer price for the connectors from the standpoint of the Connector Division?

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

Question 51

(Appendix 11A) Fregozo 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 8,000 of these connectors per year from an overseas supplier at a cost of $45 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) $54 per unit
B) $45 per unit
C) $41 per unit
D) $20 per unit

Question 52

(Appendix 11A) 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.

Question 53

(Appendix 11A) 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

Question 54

(Appendix 11A) Division A of Tripper Company produces a part that it sells to other companies. Sales and cost data for the part follow:
Division B, another division of Tripper Company, would like to buy this part from Division A. Division B is presently purchasing the part from an outside source at $38 per unit. If Division A sells to Division B, $1 in variable costs can be avoided.
Assume that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into outside sales.According to the formula in the text,what is the lowest acceptable transfer price from the viewpoint of the selling division?

A) $40 per unit
B) $39 per unit
C) $28 per unit
D) $27 per unit

Question 55

(Appendix 11A) Division A of Tripper Company produces a part that it sells to other companies. Sales and cost data for the part follow:
Division B, another division of Tripper Company, would like to buy this part from Division A. Division B is presently purchasing the part from an outside source at $38 per unit. If Division A sells to Division B, $1 in variable costs can be avoided.
Assume that Division A is presently operating at capacity.According to the formula in the text,what is the lowest acceptable transfer price from the viewpoint of the selling division?

A) $37 per unit
B) $39 per unit
C) $36 per unit
D) $38 per unit

Question 56

(Appendix 11A) 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

Question 57

(Appendix 11A) Brull 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 Safety Products Division of Brull Products, Inc needs 6,000 special heavy-duty sensors per year. The Sensor Division's variable cost to manufacture and ship this special sensor would be $60 per unit. Because these special sensors would requires more manufacturing resources than the standard sensor, the Sensor Division would have to reduce its production and sales of standard sensors to outside customers from 56,000 units per year to 46,400 units per year.
From the standpoint of the Sensor Division,what is the minimal acceptable transfer price for the special sensors for the Safety Products Division?

A) $75.00 per unit
B) $77.00 per unit
C) $83.00 per unit
D) $96.80 per unit

Question 58

(Appendix 11A) Zeilinger Products, Inc., has a Screen Division that manufactures and sells a number of products, including a standard screen that could be used by another division in the company, the Home Security Division, in one of its products. Data concerning that screen appear below:
The Home Security Division is currently purchasing 8,000 of these screens per year from an overseas supplier at a cost of $58 per screen.
Assume that the Valve Division is selling all of the valves it can produce to outside customers.From the standpoint of the Valve Division,what is the lost contribution margin if the valves are transferred internally rather than sold to outside customers?

A) $88,000
B) $392,000
C) $1,480,000
D) $296,000

Question 59

(Appendix 11A) 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.
What is the maximum price that the Transmission Division should be willing to pay for connectors transferred from the Connector Division?

A) $35 per unit
B) $65 per unit
C) $56 per unit
D) $21 per unit

Question 60

(Appendix 11A) Bacot 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 8,000 of these valves per year from an overseas supplier at a cost of $47 per valve.
Assume that the Valve Division is selling all of the valves it can produce to outside customers.What should be the minimum acceptable transfer price for the valves from the standpoint of the Valve Division?

A) $47 per unit
B) $28 per unit
C) $45 per unit
D) $53 per unit

Question 61

(Appendix 11A) Yearout 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 9,000 of these valves per year from an overseas supplier at a cost of $53 per valve.
Assume that the Valve Division is selling all of the valves it can produce to outside customers.Does there exist a transfer price that would make both the Valve and Pump Division financially better off than if the Pump Division were to continue buying its valves 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) The answer cannot be determined from the information that has been provided.
D) 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.

Question 62

(Appendix 11A) Two of the decentralized divisions of Gamberi Electronics Corporation are the Plastics Division and the Components Division. The Plastics Division sells molded parts to both the Components Division and to customers outside the corporation.
Assume that the Plastics Division is currently operating with idle capacity.Also assume that the Components Division wants to purchase from Plastics all of the additional parts that could be made with this idle capacity.In order to increase its current level of profitability,the Plastics Division should accept any transfer price on these additional parts that is above the:

A) variable cost of the additional parts.
B) full (absorption) cost of the additional parts.
C) variable cost of the additional parts plus the lost contribution margin on all units that could no longer be sold to customers outside the corporation.
D) full (absorption) cost of the additional parts plus the lost contribution margin on all units that could no longer be sold to customers outside the corporation.

Question 63

(Appendix 11A) 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

Question 64

(Appendix 11A) 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.
Assume that the Valve Division is selling all of the valves it can produce to outside customers.Also assume that $6 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) $92 per unit
B) $77 per unit
C) $91 per unit
D) $98 per unit

Question 65

(Appendix 11A) Two of the decentralized divisions of Gamberi Electronics Corporation are the Plastics Division and the Components Division. The Plastics Division sells molded parts to both the Components Division and to customers outside the corporation.
Assume that the Plastics Division is currently operating at full capacity.Also assume that the Components Division wants to increase the number of parts it purchases from Plastics.In order to maintain its current level of profitability,the Plastics Division should not accept any transfer price on these additional parts that is below the:

A) variable cost of the additional parts.
B) full (absorption) cost of the additional parts.
C) variable cost of the additional parts plus the lost contribution margin on all units that could no longer be sold to customers outside the corporation.
D) full (absorption) cost of the additional parts plus the lost contribution margin on all units that could no longer be sold to customers outside the corporation.

Question 66

(Appendix 11A) 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 70,000 units,then according to the formula in the text,what is the lowest acceptable transfer price from the viewpoint of the selling division for each of the 15,000 units needed by Q?

A) $33 per unit
B) $27 per unit
C) $28 per unit
D) $29 per unit

Question 67

(Appendix 11A) 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

Question 68

(Appendix 11A) 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 80,000 units and if,by selling to Division Q,Division P could avoid $4 per unit in variable selling expense,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) $21 per unit
C) $31 per unit
D) $33 per unit

Question 69

(Appendix 11A) 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.
Assume that the Detector Division is selling all of the detectors it can produce to outside customers.What should be the minimum acceptable transfer price for the detectors from the standpoint of the Detector Division?

A) $32 per unit
B) $98 per unit
C) $91 per unit
D) $83 per unit

Question 70

(Appendix 11A) Yearout 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 9,000 of these valves per year from an overseas supplier at a cost of $53 per valve.
Assume that the Valve Division is selling all of the valves it can produce to outside customers.Also assume that $1 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs.Does there exist a transfer price that would make both the Valve and Pump Division financially better off than if the Pump Division were to continue buying its valves 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 would accept.
B) The answer cannot be determined from the information that has been provided.
C) No, the minimum transfer price that the selling division should be willing to accept exceeds the maximum transfer price that the buying division would accept.
D) 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.

Question 71

(Appendix 11A) Tommasino 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 9,000 of these motors per year from an overseas supplier at a cost of $72 per motor.
Assume that the Motor Division has enough idle capacity to handle all of the Automotive Division's needs.Does there exist a transfer price that would make both the Motor and Automotive Division financially better off than if the Automotive Division were to continue buying its motors 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) No, the selling division's price to outside customers is higher than the price that the buying division has to pay its outside supplier.
C) 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.
D) The answer cannot be determined from the information that has been provided.

Question 72

(Appendix 11A) 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 would requires 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

Question 73

(Appendix 11A) 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.

Question 74

(Appendix 11A) Tommasino 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 9,000 of these motors per year from an overseas supplier at a cost of $72 per motor.
Assume that the Motor Division is selling all of the motors it can produce to outside customers.Does there exist a transfer price that would make both the Motor and Automotive Division financially better off than if the Automotive Division were to continue buying its motors from the outside supplier?

A) The answer cannot be determined from the information that has been provided.
B) 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.
C) 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.
D) 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.

Question 75

(Appendix 11A) 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

Question 76

(Appendix 11A) 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.
Assume that the Valve Division is selling all of the valves it can produce to outside customers.Also assume that $6 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) $61 per unit
B) $46 per unit
C) $67 per unit
D) $58 per unit

Question 77

(Appendix 11A) 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 80,000 units,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

Question 78

(Appendix 11A) 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

Question 79

(Appendix 11A) 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 would requires 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.
What is the total contribution margin on sales to outside customers that the Motor Division would give up if it were to make the special motors for the Automotive Division?

A) $513,000
B) $342,000
C) $769,500
D) $1,093,500

Question 80

(Appendix 11A) 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 Valve Division is selling all of the valves it can produce to outside customers.Also assume that $4 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs.Does there exist a transfer price that would make both the Valve and Pump Division financially better off than if the Pump Division were to continue buying its valves from the outside supplier?

A) No, the selling division's price to outside customers is higher than the price that the buying division has to pay its outside supplier.
B) The answer cannot be determined from the information that has been provided.
C) 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. Both divisions would be financially better off if the transfers were to take place.
D) 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.