Question

Aulman Inc. has a number of divisions, including a Furniture Division and a Motel Division. The...

Aulman Inc. has a number of divisions, including a Furniture Division and a Motel Division. The Motel Division owns and operates a line of budget motels located along major highways. Each year, the Motel Division purchases furniture for the motel rooms. Currently, it purchases a basic dresser from an outside supplier for $40. The manager of the Furniture Division has approached the manager of the Motel Division about selling dressers to the Motel Division. The full product cost of a dresser is $29. The Furniture Division can sell all of the dressers it makes to outside companies for $40. The Motel Division needs 10,000 dressers per year; the Furniture Division can make up to 50,000 dressers per year. Also, assume that the company policy is that all transfer prices are negotiated by the divisions involved.

Required:

1. What is the maximum transfer price?

2. What is the minimum transfer price?

3. Conceptual Connection: If the transfer takes place, what will be the transfer price?

Homework Answers

Answer #1
1)The maximum transfer price set by the Motel Division, is $40. It would not pay any more than $40 because that is the price it currently pays to outside suppliers. $       40.00
2) The minimum transfer price set by the Furniture Division, is $40 , division is operating at capacity and can sell all that it makes to outside buyers for $40. $       40.00
3) If the transfer takes place, the transfer price will be $40. It does not matter whether or not the transfer takes place, since the transfer price would be equal to the outside market price $40
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Aulman Inc. has a number of divisions including a Furniture Division and a Motel Division. The...
Aulman Inc. has a number of divisions including a Furniture Division and a Motel Division. The Motel Division owns and operates a line of budget motels located along major highways. Each year, the Motel Division purchases furniture for the motel rooms. Currently, it purchases a basic dresser from an outside supplier for $40. The manager of the Furniture Division has approached the manager of the Motel Division about selling dressers to the Motel Division. The full product cost of a...
Bostonian Inc. has a number of divisions, including Delta Division and ListenNow Division. The ListenNow Division...
Bostonian Inc. has a number of divisions, including Delta Division and ListenNow Division. The ListenNow Division owns and operates a line of MP3 players. Each year the ListenNow Division purchases component AZ in order to manufacture the MP3 players. Currently it purchases this component from an outside supplier for $6.50 per component. The manager of the Delta Division has approached the manager of the ListenNow Division about selling component AZ to the ListenNow Division. The full product cost of component...
Burt Inc. has a number of divisions, including the Indian Division, a producer of liquid pumps,...
Burt Inc. has a number of divisions, including the Indian Division, a producer of liquid pumps, and Maple Division, a manufacturer of boat engines. Indian Division produces the h20-model pump that can be used by Maple Division in the production of motors that regulate the raising and lowering of the boat engine's stern drive unit. The market price of the h20-model is $720, and the full cost of the h20-model is $540. Required: 1. If Burt has a transfer pricing...
Sports Plus Inc. has a number of divisions, including the Nylon Plus Division, producer of nylon,...
Sports Plus Inc. has a number of divisions, including the Nylon Plus Division, producer of nylon, and the Racket Division, a manufacturer of tennis rackets. Nylon Plus Division produces nylon string that can be used by Racket Division in the production of tennis rackets. The market price of the nylon is $5.30. Cost information for the nylon is:   Variable Product Cost $ 0.65 Fixed Cost   3.75      Total Product Cost $ 4.40 Racket Division needs 10,000 units of nylon per year....
Ganus Products, Inc., has a Relay Division that manufactures and sells a number of products, including...
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: Capacity in units 42,500 Selling price to outside customers $ 33 Variable cost per unit $ 10 Fixed cost per unit (based on capacity) $ 20 The Electronics Division is currently purchasing 5,950 of these relays per...
Germano Products, Inc., has a Pump Division that manufactures and sells a number of products, including...
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: Capacity in units 75,000 Selling price to outside customers $ 81 Variable cost per unit $ 28 Fixed cost per unit (based on capacity) $ 33 The Pool Products Division is currently purchasing 18,000 of these...
Pips Products, Inc., has a Receiver Division that manufactures and sells a number of products, including...
Pips 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: Capacity in units 10,000 Selling price to outside customers $ 89 Variable cost per unit $ 35 Fixed cost per unit (based on capacity) $ 42 The Industrial Products Division is currently purchasing 10,000 of these...
Germano Products, Inc., has a Pump Division that manufactures and sells a number of products, including...
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: Capacity in units 50,000 Selling price to outside customers $ 63 Variable cost per unit $ 22 Fixed cost per unit (based on capacity) $ 24 The Pool Products Division is currently purchasing 9,000 of these...
The American Battery Company has two divisions, the Electrical Division and the Assembly Division. Both divisions...
The American Battery Company has two divisions, the Electrical Division and the Assembly Division. Both divisions have the full authority to make purchasing and selling decisions of their division output to both outsiders and the other division. (A highly decentralized structure) Each Division operates as a separate profit center and is being evaluated on the basis of the divisionʹs reported profit. The Electrical Division makes the battery cores (inside components) of the battery, and the Assembly Division places those cores...
Determining Market-Based and Negotiated Transfer Prices Carreker, Inc., has a number of divisions, including the Alamosa...
Determining Market-Based and Negotiated Transfer Prices Carreker, Inc., has a number of divisions, including the Alamosa Division, producer of surgical blades, and the Tavaris Division, a manufacturer of medical instruments. Alamosa Division produces a 2.6 cm steel blade that can be used by Tavaris Division in the production of scalpels. The market price of the blade is $22.00. Cost information for the blade is: Variable product cost $ 9.80 Fixed cost 6.20 Total product cost $16.00 Tavaris needs 15,000 units...