transfer pricing

Exoplex Industries Inc. is a diversified aerospace company, including two operating divi- sions, Semiconductors and Navigational Systems divisions. Condensed divisional income statements, which involve no intracompany transfers and include a breakdown of expenses into variable and fixed components, are as    follows:

exoplex industries inc.

Divisional income Statements

For the Year ended December 31, 2016

 

 

*$432 of the $472 per unit represents materials costs, and the remaining $40 per unit represents other variable conversion expenses incurred within the Navigational Systems Division.

The Semiconductors Division is presently producing 2,240 units out of a total ca- pacity of 2,820 units. Materials used in producing the Navigational Systems Division’s product are currently purchased from outside suppliers at a price of $432 per unit. The

Semiconductors Division is able to produce the components used by the Navigational Systems Division. Except for the possible transfer of materials between divisions, no changes  are  expected  in  sales  and expenses.

instructions

5.     Would the market price of $432 per unit be an appropriate transfer price for Exoplex Industries Inc.? Explain.

6.     If the Navigational Systems Division purchases 580 units from the Semicon- ductors Division, rather than externally, at a negotiated transfer price of $310 per unit, how much would the income from operations of each division and total company income from operations increase?

7.     Prepare condensed divisional income statements for Exoplex Industries Inc. based on the data in part (2).

8.     If a transfer price of $340 per unit is negotiated, how much would the income from operations of each division and total company income from operations increase?

9.     a.                    What is the range of possible negotiated transfer prices that would be acceptable for Exoplex Industries Inc.?

b. Assuming that the managers of the two divisions cannot agree on a transfer price, what price would you suggest as the transfer price?

 

 

 

Alpha Geek

(8)

Status NEW Posted 23 Jun 2017 08:06 AM My Price 15.00

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file 1498207131-1315507_1_636336983531434023_Transfer-Pricing.xlsx preview (589 words )

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