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What is a "transfer price? and reasons to use transfer price

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Reference no: EM13149152

Directions: Answer all five questions. Please submit your work in Word or PDF formats only. You can submit an Excel file to support calculations, but please "cut and paste" your solutions into the Word or PDF file. Be sure to show how you did your calculations

Question #1

a)     What is a "transfer price?"

b)     List and describe 3 main reasons for using transfer prices.

 

Question #2

Consider the following information about a potential project:

 

Investment required

$3,000,000

Expected annual project revenue

$6,000,000

Expected annual project expenses

$5,550,000

Required rate of return

11%

Current division return on investment

18%

 

a) Calculate the project's return on investment.

b) Based solely on ROI, is this project in the firm's best interests? Why or why not?

c) Is this project in the division manager's best interests? Why or why not?

d) Perform DuPont Analysis on this project.

e) What is the project's residual income?

 

Question #3

List and describe five traits that can differentiate a customer that is relatively inexpensive to service from a customer that is relatively expensive to service.

 

Question #4

List and describe five actions a firm can take if a customer appears to be unprofitable.

 


Question #5

Consider the following quality cost report:

 

 

Q1

Q2

Q3

Q4

Prevention costs

$530

$825

$775

$650

Appraisal costs

$430

$475

$420

$360

Internal failure costs

$620

$550

$450

$350

External failure costs

$875

$725

$500

$350

Total quality costs

$2,455

$2,575

$2,145

$1,710

Total revenues

$55,000

$56,000

$65,000

$66,000

 

Do you believe this firm's quality initiatives have been successful? Be sure to justify your opinion with specific information. 

 

Reference no: EM13149152

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