Solution-What is the minimum transfer price division a

What is the minimum transfer price division a would accept

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Reference no: EM133169236

Question - Quest Motors manufactures airbags. Division A operates at full capacity and can manufacture 500 airbags a month. The variable manufacturing cost to Division A is $108 per airbag. Division A can sell airbags in the marketplace for $200 each. If sold in the marketplace, Division A incurs a shipping cost of $30 per airbag. The alternative is to transfer the airbags to Division B. Division B can acquire airbags from external suppliers at a cost of $180 each plus a $2 environmental levy.

Required -

a. Using the general transfer pricing guideline, what is the minimum price Division A should take for the airbags if sold to Division B?

b. What is the maximum transfer price Division B is willing to pay Division A for the airbags?

c. Assume instead, that Division A can only sell 60% of the airbags produced. What is the minimum transfer price Division A would accept from Division B?

Reference no: EM133169236

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What is the minimum transfer price division a would accept

Reference no: EM133169236

Reference no: EM133169236

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