Golf Holdings has two divisions: Alpha and Bravo. Alpha has a variable cost of sales of £11 per unit which is its transfer price to Bravo. However, Alpha can sell its product on the open market for a variable selling cost of £7 per unit. It is unable to do so however, as Bravo takes the entire product that Alpha can produce. Bravo uses the product it buys from Alpha as a raw material and adds its own cost of sales of £12. Bravo’s market selling price is £45 although it incurs variable selling expenses of £10 per unit. How does the transfer price influence the performance evaluation of Alpha and Bravo? What changes would you suggest?

  • CreatedSeptember 15, 2015
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