Solution-Determine the upper and lower limits for the

Determine the upper and lower limits for the transfer price

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Reference no: EM133101327

Question - Transfer pricing - Qvat Division, a subsidiary of Imogene Ltd., manufactures a silicon chip with the following costs:

Direct material $15.00

Direct labor 26.25

Variable overhead 12.75

Fixed overhead 18.00

Total $72.00

Some of the chips are sold externally for $162.00; others are transferred internally to the Kwak Division. Qvat Division's plant manager wants to establish a reasonable transfer price for chips transferred to Kwak. The purchasing manager of Kwak Division has informed the plant manager that comparable chips can be purchased externally in a price range from $112.50 to $172.50.

Required -

a. Determine the upper and lower limits for the transfer price between Qvat Division and Kwak Division.

b. If Qvat Division is presently selling all the chips it can produce to external buyers, what minimum price should be set for transfers to Kwak Division?

Reference no: EM133101327

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Determine the upper and lower limits for the transfer price

Reference no: EM133101327

Reference no: EM133101327

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