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    The Assembly division of Canadian Car Company: Transfer pricing

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    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.

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    https://brainmass.com/business/accounting/the-assembly-division-of-canadian-car-company-transfer-pricing-142997

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    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 ...

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