PT Ebony Furniture is a company that manufactures modern furniture made from light wood. The most selling product at this time is a minibar stool table for housing/apartments. Division Production makes mini bars from cutting wood to ready to assemble. While Division Marketing completes the assembly and installation process at the customer site. Data for Production Division: Product selling price to Marketing Division = Rp11,000,000/set. Currently, the Production Division produces 700 mini bars per year with a maximum capacity of 1,000. Variable costs are IDR 7,300,000/set and annual fixed costs are IDR 1,200,000,000. Data for Marketing Division: The selling price of the product to residential customers = IDR 17,000,000/set. Variable costs are IDR 1,250,000/set and annual fixed costs are IDR 600,000,000. 

The Marketing Division is currently expanding its business into the restaurant/cafe sector. The marketing Division wants to buy 100 mini bars for IDR 6,500,000 from the Production Division for the customer segment recently. The selling price for the restaurant sector is set at 20% higher than the customer price of housing, and there is an additional marketing fee of IDR 100,000/set (this additional cost only for restaurant customers). The Marketing Division Manager thinks it should be an offer This is accepted by the Production Division because it can reduce fixed costs per unit. 

Question: 

a. What is the minimum transfer price that the Production Division can charge? 

b. From the perspective of the company as a whole (Ebony), what is the plan of the Division Is the marketing profitable? Give the calculations and analysis! 

c. Do you think the Production Division will accept the transfer pricing scheme decision? Tell? 

d. Assume that the maximum capacity of the Production Division is 700 minibars (full capacity). 

The Ebony Business Director decides to carry out the Division's plan Marketing by setting a transfer price of IDR 9,500,000,- specifically for orders restaurants (100 units), for this reason, is an opportunity to develop business. 

1. What is the minimum transfer price that the Production Division can charge? 

2. Give calculations and analyze how it affects the total profit/loss of each division! 

3. What do you think about the transfer pricing decision on the company as a whole?

Answer rating: 100% (QA)

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