solution
solution.
Use the data from BE9.7. If ITA’s assembly division is currently buying from an outside supplier at $75 per unit, what will be the effect on overall company profits if internal sales for 400 units take place at the optimum transfer price?
Determine effect of transfer on profit.
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The machining division of ITA International has a capacity of 2,000 units. Its sales and cost data are:
Determine minimum transfer price.
The machining division is currently selling 1,800 units to outside customers, and the assembly division of ITA International wants to purchase 400 units from machining. If the transaction takes place, the variable selling costs per unit on the units transferred to assembly will be $0/unit, and not $5/unit. What should be the transfer price in order not to affect the machining division’s current profit?
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