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What is the maximum transfer price

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Reference no: EM132534022

In the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below:

Case 1  100,000 100,000 P90 73 10     40,000 P86

Case 2

Division A:

Capacity in units Number of units sold externally Market selling price Variable costs per unit Fixed costs per unit based on capacity

100,000 60,000 P75 58 10

Division B:

Number of units needed for production Purchase price per unit from external supplier 40,000 P74

Question 1. The company uses the opportunity cost approach to transfer pricing. What is the minimum transfer price in Case 1?

a. P90

b. P73

c. P83

d. P86

Question 2. The company uses the opportunity cost approach to transfer pricing. What is the maximum transfer price in Case 1?

a. P90

b. P91

c. P83

d. P73

Question 3. The company uses the opportunity cost approach to transfer pricing. What is the minimum transfer price in Case 2?

a. P58

b. P74

c. P68

d. P75

Question 4. The company uses the opportunity cost approach to transfer pricing. What is the maximum transfer price in Case 2?

a. P75

b. P68

c. P74

d. P58

Reference no: EM132534022

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