Question
In: Accounting
Transfer pricing is a contentious issue for almost any company where divisions buy from or sell...
Transfer pricing is a contentious issue for almost any company where divisions buy from or sell to each other. Stated another way, transfer pricing causes more conflict between divisions than almost any other issue. Does your company use transfer pricing to "charge" divisions for the cost of the products they consume? Are these prices set equal to the opportunity cost of the product? Why or why not? Can you think of a better organizational architecture?
Solutions
ekkarill92 answered 4 months agoRelated Solutions
Transfer pricing is a contentious issue for almost any company where divisions buy from or sell...
Transfer pricing is a contentious issue for almost any company
where divisions buy from or sell to each other. Stated another way,
transfer pricing causes more conflict between divisions than almost
any other issue.
What is you experience or knowledge about this issue? How do you
suggest that it be resolved?
The issue of unionization can be a highly contentious one depending on where you stand in...
The issue of unionization can be a highly contentious one
depending on where you stand in the labor market. In today's world
are unions really necessary? Do they actually benefit employees or
do unions just collect dues? Or do you think without them,
corporations would not treat their employees fairly on their
own?
The Sunrise Mattress Company uses transfer pricing for all work in process transfers between its divisions....
The Sunrise Mattress Company uses transfer pricing for all work
in process transfers between its divisions. Senior management
believes that the transfer price is an important tool to motivate
appropriate behaviour and believes that each division should
negotiate its prices when a transfer takes place. To make the
mattresses that the company sells, the Spring Division buys
processed cloth padding from an outside supplier.
Cost information on the foam produced in the Foam Division is as
follows:
Raw material...
Transfer Pricing Exoplex Industries Inc. is a diversified aerospace company, including two operating divisions, Semiconductors and...
Transfer Pricing
Exoplex Industries Inc. is a diversified aerospace company,
including two operating divisions, Semiconductors and Navigational
Systems. Condensed divisional income statements, which involve no
intracompany transfers and include a breakdown of expenses into
variable and fixed components, are as follows:
Exoplex Industries Inc.
Divisional Income Statements
For the Year Ended December 31, 20Y8
Semiconductors
Division
Navigational
Systems
Division
Total
Sales:
2,240 units × $396 per unit
$887,040
$887,040
3,675 units × $590 per unit
$2,168,250
2,168,250
Total sales
$887,040...
Transfer Pricing Exoplex Industries Inc. is a diversified aerospace company, including two operating divisions, Semiconductors and...
Transfer Pricing
Exoplex Industries Inc. is a diversified aerospace
company, including two operating divisions, Semiconductors and
Navigational Systems. Condensed divisional income statements, which
involve no intracompany transfers and include a breakdown of
expenses into variable and fixed components, are as follows:
Exoplex Industries Inc.
Divisional Income Statements
For the Year Ended December 31,
20Y8 Semiconductors
DivisionNavigational
Systems
DivisionTotalSales: 2,240 units × $396
per unit $887,040 $887,040
3,675 units × $590 per
unit $2,168,250 2,168,250
...
Problem 11A-6 Basic Transfer Pricing [LO11-5] Alpha and Beta are divisions within the same company. The...
Problem 11A-6 Basic Transfer Pricing [LO11-5]
Alpha and Beta are divisions within the same company. The
managers of both divisions are evaluated based on their own
division’s return on investment (ROI). Assume the following
information relative to the two divisions:
Case
1
2
3
4
Alpha Division:
Capacity in units
54,000
315,000
106,000
200,000
Number of units now being sold to
outside customers
54,000
315,000
81,000
200,000
Selling price per unit to outside
customers
$
100
$
40
$
63...
Problem 11A-6 Basic Transfer Pricing [LO11-5] Alpha and Beta are divisions within the same company. The...
Problem 11A-6 Basic Transfer Pricing [LO11-5]
Alpha and Beta are divisions within the same company. The
managers of both divisions are evaluated based on their own
division’s return on investment (ROI). Assume the following
information relative to the two divisions:
Case
1
2
3
4
Alpha Division:
Capacity in units
52,000
289,000
104,000
206,000
Number of units now being sold
to
outside customers
52,000
289,000
79,000
206,000
Selling price per unit to
outside
customers
$
97
$
41
$
65...
Transfer Pricing Fillmore Industries is a vertically integrated firm with several divisions that operate as decentralized...
Transfer Pricing
Fillmore Industries is a vertically integrated firm with several
divisions that operate as decentralized profit centers. Fillmore’s
Systems Division manufactures scientific instruments and uses the
products of two of Fillmore’s other divisions. The Board Division
manufactures printed circuit boards (PCBs). One PCB model is made
exclusively for the Systems Division using proprietary designs,
while less complex models are sold in outside markets. The products
of the Transistor Division are sold in a well-developed competitive
market; however, one transistor...
Transfer pricing involves setting a price on goods that are transferred between divisions within a single...
Transfer pricing involves setting a price on goods that are
transferred between divisions within a single company. Is this
practice necessary? What are the advantages? Disadvantages? What’s
an appropriate price if it’s going to be done?
Discuss the pricing basis on which divisions should offer to transfer goods in order that corporate...
Discuss the pricing basis on which divisions should offer to
transfer goods in order that corporate profit-maximizing decisions
should take place.
Word count for this discussion response -
150 words maximum
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