You have been given the assignment to read Beer School: Bottling Success at The Brooklyn Brewery. Upon completion of reading this informative book dealing with this real life rags to riches entrepreneurial….
what range would the transfer price fall in?
1. Gover, Inc., transfers 100,000 units from Division A, which manufactures them at a cost of $20 per unit plus $1,000,000 in fixed costs, to Division B, which finishes them at a cost of $7 per unit, plus $200,000 in fixed costs, then sells the finished product for $50. Division A could sell the unfinished units on the market for $35. Gover sets its transfer prices at 5% below market price. Calculate the transfer price.
2. Passico has two divisions, Amber division and Crimson division. Amber division, which has an annual capacity of 20,000 units, manufactures parts at a variable cost of $35 per unit, which sell on the market for $50 per unit. Market demand is currently 10,000 units per year. Crimson division requires 5,000 units per year from Amber division. In a negotiation, what range would the transfer price fall in?