Purchase Solution

The Assembly division of Canadian Car Company: Transfer pricing

Not what you're looking for?

Ask Custom Question

The Assembly division of Canadian Car Company has offered to purchase 90,000 batteries from the Electrical division for $104 per unit. At a normal volume of 250,000 batteries per year, production costs per battery are as follows:

Direct materials
Direct mfg. labour
Variable factory overhead
Fixed mfg. overhead
Total $40
20
12
40
$112

The Electrical division has been selling 250,000 batteries per year to outside buyers at $136 each. Capacity is 350,000 batteries per year. The Assembly division has been buying batteries from outside sources for $130 each.
a. Should the Electrical division manager accept the offer? Explain.

b. From the company's perspective, will the internal sales be of any benefit? Explain.

Attachments
Purchase this Solution
Solution Summary

Computations and guide for you.

Solution Preview

The Assembly division of Canadian Car Company has offered to purchase 90,000 batteries from the Electrical division for $104 per unit. At a normal volume of 250,000 batteries per year, production costs per battery are as follows:

Direct materials
Direct mfg. labour
Variable factory overhead
Fixed mfg. overhead
Total $40
20
12
40 ...

Purchase this Solution
Free BrainMass Quizzes
Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Motivation

This tests some key elements of major motivation theories.

View More Free Quizzes
Related BrainMass Solutions

  • Transfer Pricing problem

    235144 Transfer Pricing problem(Intensive problem) The Assembly Division of American car Company has offered to purchase 90,000 batteries from the electrical division for $100 per unit.At a normal volume of 250,000 batteries per year,production costs

  • Trasfer Price

    b) what would the transfer price be if the two division agreed to split the total company savings evenly between them?

  • Operating Income and Transfer Price

    141755 Operating Income and Transfer Price The Mill Flow Company has two divisions. The Cutting Division prepares timber at its sawmills. The Assembly Division prepares the cut lumber into finished wood for the furniture industry.

  • Milwaukee Metallurgy Corporation (MMC)

    The Fabrication Division transfers partially completed components to the Assembly Division at a predetermined transfer price. /The Fabrication Division's standard variable production cost per unit is $450.

  • Finance Question-The commando motorcycle company

    What is the lowest acceptable transfer price from the viewpoint of the selling division?

  • Transfer Prices and GAAP

    The main rule is that transfer pricing needs to be reasonable - which keeps the practice of using transfer pricing legitimate for internal business use.

  • Transfer Pricing Basics

    From the standpoint of the entire company, should a transfer take place? Why or why not? dear student, anwer Transfer pricing basics are examined.

  • AM Marketing Division

    Now, in the next paragraphs, there will be a discussion on the increase in the sales of AM Marketing division of the company and the changes in the existing transfer pricing policy for avoiding outside purchase by AM Marketing division.

  • Differences in Management

    In factories, mass production is achieved by a variety of means, such as division and specialization of labor and mechanization these speed up production and allow the manufacture of near identical, interchangeable parts.

View More Related Solutions