NUBD Co. has two divisions, Parts Division (PD and Equipment Division (ED). Each division manager has full responsibility on all decisions regarding sales to internal and external customers. ED has always acquired a certain part from PD at negotiated price of P38 per unit. Due to peso devaluation, PD informed ED that it has increased its transfer price to P45. The new market price is P50 per unit. An outside supplier offered to sell ED the same part at P40 per unit and the management of ED is considering accepting the offer. The Parts division provided the following data: Equipment division's parts requirements 5,000 units Parts division's variable cost per unit Parts division's fixed cost per unit P35 P10

NUBD Co. has two divisions, Parts Division (PD and Equipment Division (ED). Each division manager has full responsibility on all decisions regarding sales to internal and external customers. ED has always acquired a certain part from PD at negotiated price of P38 per unit. Due to peso devaluation, PD informed ED that it has increased its transfer price to P45. The new market price is P50 per unit. An outside supplier offered to sell ED the same part at P40 per unit and the management of ED is considering accepting the offer. The Parts division provided the following data: Equipment division's parts requirements 5,000 units Parts division's variable cost per unit Parts division's fixed cost per unit P35 P10

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 6CE

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