Reference no: EM13902941
Transfer pricing. Spring Waters, Inc., produces bottled drinks. The New York Division acquires the water, adds carbonation, and sells it in bulk quantities to the New Jersey Division of Spring Waters and to outside buyers. The New Jersey Division buys carbonated water in bulk, adds flavoring, bottles it, and sells it.
Last year, the New York Division produced 1,500,000 gallons, of which it sold 1,300,000 gallons to the New Jersey Division and the remaining 200,000 gallons to outsiders for $0.40 per gallon. The New Jersey Division processed the 1,300,000 gallons, which it sold for $1,500,000. New York's variable costs were $440,000 and its fixed costs were $120,000. The New Jersey Division incurred an additional variable cost of $320,000 and $200,000 of fixed costs. Both divisions operated below capacity.
a. Prepare division income statements assuming the transfer price is at the external market price of $0.40 per gallon.
b. Repeat part a. assuming a negotiated transfer price of $0.30 per gallon is used.
c. Respond to the statement: ‘‘The choice of a particular transfer price is immaterial to the company as a whole.''
|
Describe the economic basis for transfer pricing systems
: Describe the economic basis for transfer pricing systems. ‘‘The return on investment measure may be biased in favor of divisions with older plant and equipment.'' Explain.
|
|
Brookes co. prepare the journal entry
: Refer to the information in Exercise 9 6 to complete the following requirements.
|
|
What are the advantages of using the roi measure
: What are the advantages of using the ROI measure rather than the value of division profits as a performance evaluation technique?
|
|
Financial options and weighted average cost of capital
: Financial Options and Weighted Average Cost of Capital
|
|
Prepare division income statements for spring waters inc
: Prepare division income statements assuming the transfer price is at the external market price of $0.40 per gallon. Repeat part a. assuming a negotiated transfer price of $0.30 per gallon is used.
|
|
The average utiliztion of the three teller service system
: You are the manager of a local bank where three tellers provide services to customers. On average, each teller takes three minutes to serve a customer. Customer arrives, on average, at a rate of 44 per hour. the average utiliztion of the three telle..
|
|
Jerry tiller each capable of serving four customers per hour
: Fantastic Salon is run by three stylists, jenny perez, jill sloan, and jerry tiller each capable of serving four customers per hour, on average. Use POM for windows or OM explorer to answer the following questions. During busy periods of the day, whe..
|
|
Average according to an exponential distribution
: The solomon, smith, and samson law firm produces many legal documents that must be word processed for clients and the firm. Requests average 6 pages of documents per hour, an they arrive according to a poison distribution. The secretary can word proc..
|
|
Appraise the viability of hybrid social ventures in ghana
: Q 1. Appraise the viability of hybrid social ventures in Ghana? Q 2.i. List the main characteristics of hybrid business models? ii. In literature (Hockerts, 2015), hybrid organizations are classified in three types, according to their field of a..
|