What transfer price should be set for pepsi

Assignment Help Accounting Basics

Reference no: EM13138991

Prior to 1997, PepsiCo, a major soft drink company, had a restaurant division consisting of Kentucky Fried Chicken, Taco Bell, and Pizza Hut. The only cola beverage these restaurants served was Pepsi. Assume that the major reason PepsiCo owned fast food restaurants is an attempt to increase its share of the cola market. Under this assumption, some Pizza Hut patrons who order a cola at the restaurant and are told they are drinking a Pepsi will switch and become Pepsi drinkers instead of Coke drinkers on other purchase occasions. However, studies have shown that some customers refuse to eat at restaurants unless they can get a Coke.

PepsiCo sells Pepsi Cola to non-PepsiCo restaurants at $0.53 per gallon. This is the market price of Pepsi-Cola. Pepsi-Cola's variable manufacturing cost is $0.09 per gallon and its total (fixed and variable) manufacturing cost is $0.22 per gallon. PepsiCo produces Pepsi-Cola in numerous plants located around the world. Plant capacity can be added in small increments (e.g., a half-million gallons per year). The cost of additional capacity is approximately equal to the fixed costs per gallon of $0.13.

Required: What transfer price should be set for Pepsi transferred from the soft drink division of PepsiCo to a PepsiCo restaurant such as Taco Bell? Justify your answer.

Reference no: EM13138991

Questions Cloud

Curve-budget line analysis : Use an indifference curve-budget line analysis to depict the situations, prior to the ban on smoking, of a student who smoked on campus, and of a student who did not smoke.

Describe the pros and cons of monitoring through observing : Samson Company is an engineering firm. Many of the employees are engineers who are working individually on different projects. Most of the design work takes place on computers. The computers are connected by a network and employees can also "surf"..

Theory of evolution-philosophical evolutionism : The Catholic Church does NOT reject the scientific theory of evolution, but it DOES reject the philosophy of evolutionism. Discuss how the theory of evolution and philosophical evolutionism are different.

Explain what are the distinguishing features of the response : What are the distinguishing features of the response in the pass-band? What are the distinguishing features of the response in the stop-band? What is an all pass filter?

What transfer price should be set for pepsi : PepsiCo sells Pepsi Cola to non-PepsiCo restaurants at $0.53 per gallon. This is the market price of Pepsi-Cola. Pepsi-Cola's variable manufacturing cost is $0.09 per gallon and its total (fixed and variable) manufacturing cost is $0.22 per gallon..

Find probability that bridge gets constructed in hours : A mean of 400 labour hours and a standard deviation of 100 labour hours. What is the probability that the bridge gets constructed between 350 and 450 hours?

How many feet of copper can be obtained : A copper refinery produces a copper ingot weighing 180lb . If the copper is drawn into wire whose diameter is 8.10 mm , how many feet of copper can be obtained from the ingot? The density of copper is 8.94g/cm3 .

Prepare schedules of accounts : Prepare schedules of accounts receivable, accounts payable, and inventory as at 30 April 2012, and reconcile these with the control accounts in the general ledger.

Evaluate the pros and cons of the present university : Eastern University pays the benefit directly to the university where the staff/faculty member's child is enrolled or if the student is attending Eastern, it reduces the amount of tuition owed by the faculty/staff member.

User Account

All Pages