Use the information below to answer Question 25 - 27.

Kiku Co. currently manufactures and sells 2,500 units of KP1 motors annually. The selling price is $190 and the variable cost $110 per unit.

Yoko, the Japanese subsidiary of Kiku, currently purchases 1,200 units of KP1 from its local supplier at $210 each. Yoko requires these motors to have Japanese safety standards on them, which would cost Kiku $18,000 for a new testing machine, and $20 for a safety component on each unit. In order to transfer 1,200 units to Yoko, Kiku will need to reduce 600 units of its production of KP1.

Please do not enter "$", "( )", "%", or " ," for all your answers. Please enter an absolute number for positive, increase or cash inflow, and enter a negative sign " " for negative, decrease, cost, or cash outflow.

What is the range of the transfer price per unit?

Minimum CostTPMaximum PriceVariable CostIncremental Cost

Fixed + Variable

(per unit)

Opportunity Cost$$$$

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Question 26

8pts

Please do not enter "$", "( )", "%", or " ," for all your answers. Please enter an absolute number for positive, increase or cash inflow, and enter a negative sign " " for negative, decrease, cost, or cash outflow.

Calculate the effect on Kiku's income if Yoko purchases 1,200 motors locally:

Cost of Purchase:$Cost savings:$Opportunity Cost:$Net benefit (cost) of purchasing locally:$

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Question 27

2pts

If Kiku pays higher tax than Yoko, to reduce overall taxes, should the transfer price be set? [ Select ] ["Split the difference between the cost and the market price.", "Close to the cost.", "Close to the market price."]