Computech Company operates as a decentralized multidivisional electronics company. Its laptop division buys most of its monitors from the screen division. The screen division's incremental costs for manufacturing the monitors are $280 per unit. The screen division is currently working at 85% of capacity. The monitor's current market price is $310 per unit.
Instructions
(a) Using the general approach to transfer pricing, determine the minimum transfer price for the screen division.
(b) Computech Company's transfer price rules state that whenever divisions with unused capacity sell products internally, they must transfer the products at incremental costs. Discuss how this transfer-price policy will affect goal congruence, division performance, and autonomy.
(c) The screen and laptop divisions have negotiated transfer price between $280 and $310 per monitor. Discuss the impact of this transfer price on each division in terms of goal congruence, division performance, and division autonomy.