ACCT 210 1st Edition Lecture 15 Outline of Last Lecture I. Exam 2 informationII. Price varianceIII. Quantity varianceOutline of Current Lecture I. Transfer pricingII. Exercise 10-18III. Exercise 10-19IV. Exercise 10-20V. Exercise 10-21Current LectureI. Transfer pricinga. Transfer pricing specifically refers to sales occurring within different divisions of the same companyb. Structure:i. Ceiling: maximum price = the market priceii. Floor: minimum price = variable costc. Always do what’s best for the overall company, not the divisiond. Minimum transfer pricei. Minimum = variable cost to produce + contribution margin forgone from the transferii. If there is adequate excess capacity, CM forgone = $0iii. Will always assume adequate excess capacity; thus minimum transfer price = variable costII. Exercise 10-18a.Minimum transfer price = $6/unitb.Between $6 and $12III. Exercise 10-19a.Cost based transfer price = $29b.Market based transfer price = $50IV. Exercise 10-20a.Division A Division B Corporate income (A+B)Sales 12,000 x $157 = $1,884,00012,000 x $241 = $2,892,000$4,796,000Variable costs 12,000 x $117 = $1,404,00012,000 x ($157 + $44) = $2,412,000$3,816,000CM $480,000 $480,000 $960,000b.Division A Division B Corporate income (A+B)Sales 0 12,000 x $241 = $2,892,000$2,892,000Variable costs 0 12,000 x ($166 + $44) = $2,520,000$2,520,000CM 0 $372,000 $372,000V. Exercise 10-21a.Printing division Accounting div Corporate totalSales 2600 0 2600Variable costs 1600 2600 4200CM 1000 (2600) (1600)b.Printing division Accounting div Corporate totalSales 0 0 0Variable costs 0 1780 1780CM 0 (1780) (1780)c.Internal option (paying for
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