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    General Guideline Transfer Pricing The Slate Company Manufactur

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    trilocksp Singh
    The Slate Company has two divisions: the screen division (SD) and the assembly division (AD). The SD manufactures television screens at an incremental cost of $65 per screen and can sell externally for $100 per screen after $8 in marketing costs. The AD assembles TVs, and can buy screens externally for $100 per screen with $7 in purchasing costs. The minimum price the SD will sell for internally is $73 per screen, while the maximum the AD will buy for is $93 per screen. If the SD can only sell 70% of its capacity externally, the optimal internal transfer price is $86.50 per screen, allowing the full capacity to be utilized.

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    General Guideline Transfer Pricing The Slate Company Manufactur

    Uploaded by

    trilocksp Singh
    125 views1 page
    The Slate Company has two divisions: the screen division (SD) and the assembly division (AD). The SD manufactures television screens at an incremental cost of $65 per screen and can sell externally for $100 per screen after $8 in marketing costs. The AD assembles TVs, and can buy screens externally for $100 per screen with $7 in purchasing costs. The minimum price the SD will sell for internally is $73 per screen, while the maximum the AD will buy for is $93 per screen. If the SD can only sell 70% of its capacity externally, the optimal internal transfer price is $86.50 per screen, allowing the full capacity to be utilized.

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    General Guideline Transfer Pricing the Slate Company Manufactur

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    The Slate Company has two divisions: the screen division (SD) and the assembly division (AD). The SD manufactures television screens at an incremental cost of $65 per screen and can sell externally for $100 per screen after $8 in marketing costs. The AD assembles TVs, and can buy screens externally for $100 per screen with $7 in purchasing costs. The minimum price the SD will sell for internally is $73 per screen, while the maximum the AD will buy for is $93 per screen. If the SD can only sell 70% of its capacity externally, the optimal internal transfer price is $86.50 per screen, allowing the full capacity to be utilized.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    125 views1 page

    General Guideline Transfer Pricing The Slate Company Manufactur

    Uploaded by

    trilocksp Singh
    The Slate Company has two divisions: the screen division (SD) and the assembly division (AD). The SD manufactures television screens at an incremental cost of $65 per screen and can sell externally for $100 per screen after $8 in marketing costs. The AD assembles TVs, and can buy screens externally for $100 per screen with $7 in purchasing costs. The minimum price the SD will sell for internally is $73 per screen, while the maximum the AD will buy for is $93 per screen. If the SD can only sell 70% of its capacity externally, the optimal internal transfer price is $86.50 per screen, allowing the full capacity to be utilized.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    Solved: General guideline transfer pricing The Slate

    Company manufactur
    General guideline transfer pricing The Slate Company manufactur

    General guideline, transfer pricing The Slate Company manufactures and sells television sets.
    Its assembly division (AD) buys television screens from the screen division (SD) and assembles
    the TV sets. The SD, which is operating at capacity, incurs an incremental manufacturing cost of
    $65 per screen. The SD can sell all its output to the outside market at a price of $100 per
    screen, after incurring a variable marketing and distribution cost of $8 per screen. If the AD
    purchases screens from outside suppliers at a price of $100 per screen, it will incur a variable
    purchasing cost of $7 per screen. Slate’s division managers can act autonomously to maximize
    their own division’s operating income.
    Required
    1. What is the minimum transfer price at which the SD manager would be willing to sell screens
    to the AD?
    2. What is the maximum transfer price at which the AD manager would be willing to purchase
    screens from the SD?
    3. Now suppose that the SD can sell only 70% of its output capacity of 20,000 screens per
    month on the open market. Capacity cannot be reduced in the short run. The AD can assemble
    and sell more than 20,000 TV sets per month.
    a. What is the minimum transfer price at which the SD manager would be willing to sell screens
    to the AD?
    b. From the point of view of Slate’s management, how much of the SD output should be
    transferred to the AD?
    c. If Slate mandates the SD and AD managers to “split the difference” on the minimum and
    maximum transfer prices they would be willing to negotiate over, what would be the resulting
    transfer price? Does this price achieve the outcome desired in requirement 3b?

    General guideline transfer pricing The Slate Company manufactur

    ANSWER
    https://solvedquest.com/general-guideline-transfer-pricing-the-slate-company-manufactur/

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