Question : 96.              The most common method used to establish transfer prices : 1311806

 

 

96.              The most common method used to establish transfer prices is

a.negotiated transfer pricing.

b.market-based transfer pricing.

c.cost-plus transfer pricing.

d.cost-based transfer pricing.

 

 

97.              When a sale occurs between divisions of the same company, which transfer pricing approach may lead to the buying division overpricing its product?

a.Cost based transfer pricing

b.Market-based transfer pricing

c.Negotiated transfer pricing

d.Cost-plus transfer pricing

 

 

98.              The Lumber Division of Paul Bunyon Homes Inc. produces and sells lumber that can be sold to outside customers or within the company to the Construction Division. The following data have been gathered for the coming period:

Lumber Division:

Capacity200,000 board feet

Price per board foot$2.50

Variable production cost per bd. ft.$1.25

Variable selling cost per bd. ft.$0.50

Construction Division:

Board feet needed60,000

Outside price paid per bd. ft.$2.00

If the Lumber Division sells to the Construction Division, $0.35 per board foot can be saved in shipping costs.

 

If current outside sales are 130,000 board feet, what is the minimum transfer price that the Lumber Division could accept?

a.$1.25

b.$1.40

c.$1.75

d.$2.50

 

 

99.              The Lumber Division of Paul Bunyon Homes Inc. produces and sells lumber that can be sold to outside customers or within the company to the Construction Division. The following data have been gathered for the coming period:

Lumber Division:

Capacity200,000 board feet

Price per board foot$2.50

Variable production cost per bd. ft.$1.25

Variable selling cost per bd. ft.$0.50

Construction Division:

Board feet needed60,000

Outside price paid per bd. ft.$2.00

If the Lumber Division sells to the Construction Division, $0.35 per board foot can be saved in shipping costs.

 

If current outside sales are 150,000 board feet, what is the minimum transfer price that the Lumber Division could accept?

a.$2.00

b.$1.65

c.$1.40

d.$2.15

 

 

100.The Lumber Division of Paul Bunyon Homes Inc. produces and sells lumber that can be sold to outside customers or within the company to the Construction Division. The following data have been gathered for the coming period:

Lumber Division:

Capacity200,000 board feet

Price per board foot$2.50

Variable production cost per bd. ft.$1.25

Variable selling cost per bd. ft.$0.50

Construction Division:

Board feet needed60,000

Outside price paid per bd. ft.$2.00

If the Lumber Division sells to the Construction Division, $0.35 per board foot can be saved in shipping costs.

 

If the Lumber Division has sufficient excess capacity to fulfill the Construction Division’s needs, what will be the effect on the company’s overall contribution margin?

a.Decrease by $30,000

b.Decrease by $24,000

c.Increase by $36,000

d.Increase by $33,500

 

 

101.Tuttle Motorcycles Inc. manufactures and sells high-priced motorcycles. The Engine Division produces and sells engines to other motorcycle companies and internally to the Production Division. It has been decided that the Engine Division will sell 20,000 units to the Production Division at $1,050 a unit. The Engine Division, currently operating at capacity, has a unit sales price of $2,550 and unit variable costs and fixed costs of $1,050 and $750, respectively. The Production Division is currently paying $2,400 per unit to an outside supplier. $90 per unit can be saved on internal sales from reduced selling expenses. What is the minimum transfer price that the Engine Division should accept?

a.$2,460

b.$2,550

c.$2,400

d.$1,500

 

 

102.Tuttle Motorcycles Inc. manufactures and sells high-priced motorcycles. The Engine Division produces and sells engines to other motorcycle companies and internally to the Production Division. It has been decided that the Engine Division will sell 20,000 units to the Production Division at $1,050 a unit. The Engine Division, currently operating at capacity, has a unit sales price of $2,550 and unit variable costs and fixed costs of $1,050 and $750, respectively. The Production Division is currently paying $2,400 per unit to an outside supplier. $90 per unit can be saved on internal sales from reduced selling expenses. What is the increase/decrease in overall company profits if this transfer takes place?

a.Decrease $1,200,000

b.Increase $2,520,000

c.Decrease $3,000,000

d.Increase $27,000,000

 

 

103.The Can Division of Fruit Products Inc. manufactures and sells tin cans externally for $0.60 per can. Its unit variable costs and unit fixed costs are $0.24 and $0.08, respectively. The Packaging Division wants to purchase 50,000 cans at $0.32 a can. Selling internally will save $0.02 a can. Assuming the Can Division has sufficient capacity, what is the minimum transfer price it should accept?

a.$0.24

b.$0.32

c.$0.22

d.$0.30

 

 

104.The Can Division of Fruit Products Inc. manufactures and sells tin cans externally for $0.60 per can. Its unit variable costs and unit fixed costs are $0.24 and $0.08, respectively. The Packaging Division wants to purchase 50,000 cans at $0.32 a can. Selling internally will save $0.02 a can. Assuming the Can Division is already operating at full capacity, what is the minimum transfer price it should accept?

a.$0.58

b.$0.66

c.$0.28

d.$0.34

 

105.The Dairy Division of Famous Foods, Inc. produces and sells milk to outside customers. The operation has the capacity to produce 200,000 gallons of milk a year. Last year’s operating results were as follows:

Sales (160,000) gallons$500,000

Variable costs  312,000

Contribution margin188,000

Fixed costs  100,000

Net Income$  88,000

 

Assume the Yogurt Division wants to purchase 30,000 gallons of milk from the Dairy Division. The minimum price that will increase the Dairy Division’s profit is

a.$2.50 per gallon.

b.$1.18 per gallon.

c.$1.95 per gallon.

d.$0.55 per gallon.