ACCT 210 1st Edition Lecture 15 Outline of Last Lecture I Exam 2 information II Price variance III Quantity variance Outline of Current Lecture I Transfer pricing II Exercise 10 18 III Exercise 10 19 IV Exercise 10 20 V Exercise 10 21 Current Lecture I Transfer pricing a Transfer pricing specifically refers to sales occurring within different divisions of the same company b Structure i Ceiling maximum price the market price ii Floor minimum price variable cost c Always do what s best for the overall company not the division d Minimum transfer price i Minimum variable cost to produce contribution margin forgone from the transfer ii If there is adequate excess capacity CM forgone 0 iii Will always assume adequate excess capacity thus minimum transfer price variable cost II Exercise 10 18 a Minimum transfer price 6 unit b Between 6 and 12 III Exercise 10 19 a Cost based transfer price 29 b Market based transfer price 50 IV Exercise 10 20 a Division B 12 000 x 241 2 892 000 12 000 x 157 44 2 412 000 480 000 Corporate income A B 4 796 000 CM Division A 12 000 x 157 1 884 000 12 000 x 117 1 404 000 480 000 Sales Division A 0 Corporate income A B 2 892 000 Variable costs 0 CM 0 Division B 12 000 x 241 2 892 000 12 000 x 166 44 2 520 000 372 000 Sales Variable costs 3 816 000 960 000 b V Exercise 10 21 2 520 000 372 000 a Sales Variable costs CM Printing division 2600 1600 1000 Accounting div 0 2600 2600 Corporate total 2600 4200 1600 Sales Variable costs CM Printing division 0 0 0 Accounting div 0 1780 1780 Corporate total 0 1780 1780 b c Internal option paying for 2600
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