Division A has the capacity to produce 120,000 units. The normal selling price of each unit...

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Division A has the capacity to produce 120,000 units. The normal selling price of each unit is P80. The variable cost incurred for each unit is P42. The total direct fixed cost for the relevant range is P1, 150,000. Division B can use the products of Division A as an input in its manufacturing process but is currently acquiring the said products from an outside supplier. The price per unit is P75. The total annual demand is 30,000 units. SHOW SOLUTIONS A.Assuming sufficient capacity, what is the minimum acceptable transfer price to Division A? B.Assuming only 22,500 excess capacity, what is the minimum acceptable transfer price to Division A? C.Assuming only 22,500 excess capacity and that Division A can avoid variable selling cost per unit of P4 but will incur a one-time fixed cost of P30,000 for the order, what is the minimum acceptable transfer price to Division A? D.Assuming no excess capacity, what is the minimum acceptable transfer price to Division A? E.What is the maximum acceptable transfer price to Division B? Division A has the capacity to produce 120,000 units. The normal selling price of each unit is P80. The variable cost incurred for each unit is P42. The total direct fixed cost for the relevant range is P1, 150,000. Division B can use the products of Division A as an input in its manufacturing process but is currently acquiring the said products from an outside supplier. The price per unit is P75. The total annual demand is 30,000 units. SHOW SOLUTIONS A.Assuming sufficient capacity, what is the minimum acceptable transfer price to Division A? B.Assuming only 22,500 excess capacity, what is the minimum acceptable transfer price to Division A? C.Assuming only 22,500 excess capacity and that Division A can avoid variable selling cost per unit of P4 but will incur a one-time fixed cost of P30,000 for the order, what is the minimum acceptable transfer price to Division A? D.Assuming no excess capacity, what is the minimum acceptable transfer price to Division A? E.What is the maximum acceptable transfer price to Division B?

Answer rating: 100% (QA)

To find the minimum and maximum acceptable transfer prices between Division A and Division B we need to consider the relevant costs and capacities for each scenario Lets calculate each case step by st... View the full answer