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Gibson Motors manufactures specialty tractors. It has two divisions: a Tractor Division and a Tire Division. The Tractor Division can use the tires produced by the Tire Division. The market price per tire is $75. The Tire Division has the following costs per tire: i (Click the icon to view the costs and additional information.) Read the requirements. Requirement 1. Assume that the Tire Division has excess capacity, meaning that it can produce tires for the Tractor Division without giving up any of its current tire sales to outsiders. If Gibson Motors has a negotiated transfer price policy, what is the lowest acceptable transfer price? What is the highest acceptable transfer price? (Assume the $1 includes only the variable portion of conversion costs.) The lowest acceptable transfer price is the Tire Division's Requirements 1. Assume that the Tire Division has excess capacity, meaning that it can produce tires for the Tractor Division without giving up any of its current tire sales to outsiders. If Gibson Motors has a negotiated transfer price policy, what is the lowest acceptable transfer price? What is the highest acceptable transfer price? 2. If Gibson Motors has a cost-plus transfer price policy of full absorption cost plus 10%, what would the transfer price be? - X 3. If the Tire Division is currently producing at capacity (meaning that it is selling every single tire it has the capacity to produce), what would likely be the fairest transfer price strategy to use? What would be the transfer price in this case? Clear all Check answer

Gibson Motors manufactures specialty tractors. It has two divisions: a Tractor Division and a Tire Division. The Tractor Division can use the tires produced by the Tire Division. The market price per tire is $75. The Tire Division has the following costs per tire: i (Click the icon to view the costs and additional information.) Read the requirements. Requirement 1. Assume that the Tire Division has excess capacity, meaning that it can produce tires for the Tractor Division without giving up any of its current tire sales to outsiders. If Gibson Motors has a negotiated transfer price policy, what is the lowest acceptable transfer price? What is the highest acceptable transfer price? (Assume the $1 includes only the variable portion of conversion costs.) The lowest acceptable transfer price is the Tire Division's Requirements 1. Assume that the Tire Division has excess capacity, meaning that it can produce tires for the Tractor Division without giving up any of its current tire sales to outsiders. If Gibson Motors has a negotiated transfer price policy, what is the lowest acceptable transfer price? What is the highest acceptable transfer price? 2. If Gibson Motors has a cost-plus transfer price policy of full absorption cost plus 10%, what would the transfer price be? - X 3. If the Tire Division is currently producing at capacity (meaning that it is selling every single tire it has the capacity to produce), what would likely be the fairest transfer price strategy to use? What would be the transfer price in this case? Clear all Check answer

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Gibson Motors manufactures specialty tractors. It has two divisions: a Tractor Division and a Tire Division. The Tractor Division can use the tires produced by the Tire Division. The market price per tire is $75. The Tire Division has the following costs per tire: i (Click the icon to view the costs and additional information.) Read the requirements. Requirement 1. Assume that the Tire Division has excess capacity, meaning that it can produce tires for the Tractor Division without giving up any of its current tire sales to outsiders. If Gibson Motors has a negotiated transfer price policy, what is the lowest acceptable transfer price? What is the highest acceptable transfer price? (Assume the $1 includes only the variable portion of conversion costs.) The lowest acceptable transfer price is the Tire Division's Requirements 1. Assume that the Tire Division has excess capacity, meaning that it can produce tires for the Tractor Division without giving up any of its current tire sales to outsiders. If Gibson Motors has a negotiated transfer price policy, what is the lowest acceptable transfer price? What is the highest acceptable transfer price? 2. If Gibson Motors has a cost-plus transfer price policy of full absorption cost plus 10%, what would the transfer price be? C 3. If the Tire Division is currently producing at capacity (meaning that it is selling every single tire it has the capacity to produce), what would likely be the fairest transfer price strategy to use? What would be the transfer price in this case? X Clear all Check answer
Transcribed Image Text:Gibson Motors manufactures specialty tractors. It has two divisions: a Tractor Division and a Tire Division. The Tractor Division can use the tires produced by the Tire Division. The market price per tire is $75. The Tire Division has the following costs per tire: i (Click the icon to view the costs and additional information.) Read the requirements. Requirement 1. Assume that the Tire Division has excess capacity, meaning that it can produce tires for the Tractor Division without giving up any of its current tire sales to outsiders. If Gibson Motors has a negotiated transfer price policy, what is the lowest acceptable transfer price? What is the highest acceptable transfer price? (Assume the $1 includes only the variable portion of conversion costs.) The lowest acceptable transfer price is the Tire Division's Requirements 1. Assume that the Tire Division has excess capacity, meaning that it can produce tires for the Tractor Division without giving up any of its current tire sales to outsiders. If Gibson Motors has a negotiated transfer price policy, what is the lowest acceptable transfer price? What is the highest acceptable transfer price? 2. If Gibson Motors has a cost-plus transfer price policy of full absorption cost plus 10%, what would the transfer price be? C 3. If the Tire Division is currently producing at capacity (meaning that it is selling every single tire it has the capacity to produce), what would likely be the fairest transfer price strategy to use? What would be the transfer price in this case? X Clear all Check answer
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