TEB, Inc., which manufactures video games, consists of two divisions, each operating as a profit center Division A makes…

TEB, Inc., which manufactures video games, consists of two divisions, each operating as a profit center Division A makes…

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TEB, Inc., which manufactures video games, consists of two divisions, each operating as a profit
center Division A makes a component that is needed by Division B; however, if the price from
Division A is too high, Division B has indicated it would purchase the component from an
outside supplier. Additional information related to the divisions is:
10,000 units
$150
$1,500,000
$160
Division B’s annual needs for component
Division As variable cost per unit
Division A’s annual fixed cost
Price per unit from outside supplier
Assume Division A sells units to outsiders for $170 each and has over 10,000 units of excess
capacity which it cannot use to sell components to outsiders. Also assume both divisions know
the overall company will save money by producing the units internally and transferring them
from Division A to Division B.
50. The most logical minimum acceptable transfer price is
51. The most logical maximum acceptable transfer price is

Expert Answer:

Answer rating: 100% (QA)

The transfer price is the price at which one division sells a product or service to another division within the same company The transfer price should
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