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1. Answer Details A.) murder bell when the company has unornamented mental object: As the excellent motor divison has lavishness force, indeed we dupe to use the quest formula to watch over the convert bell, token(prenominal) transfer value = protean address + chance monetary value here(predicate) covariant cost per unit = $8 fortune cost (contribution ma... A.) transplant monetary value when the company has excess qualification: As the sm wholly motor divison has excess capacity, then we have to use the following formula to determine the transfer price, minimum transfer price = Variable cost + hazard cost Here variable cost per unit = $8 Opportunity cost (contribution margin) = $0 (at excess capacity) So minimum transfer price at excess capacity = $8. B.) Transfer price when the company has no excess capacity: At no excess capacity, the company will stimulate and sells unless the limited units. Here the company should receive all the vari able costs and contribution margin to remaining fire its costs. If the pick at division cannot cover that amount -called minmu transfer price it should not sell its products.

Here the opportunity cost = selling price - variable cost = 30 - 8 Opportunity cost = $22 So minimum transfer price = Variable cost + Opportunity cost = $8 + 22 Minimum transfer price = $30 C). Effect of capacity on transfer price: Transfer price is affected by capacity of the concern. Let us see how the capacity could salt lick the transfer price. In the given problem we have overbearing cost per unit, variable cost per unit and selling price per uni t. What happened at the excess capacity the ! company could sell its products at reletively low price, since it has excess capacity so thst it can cover its costs by producing in bulk. But in determine of no excess capacity the company has to sell its products at theprice, that covers the variable cost as well as contribtion margin.If you assurance to get a full essay, order it on our website: BestEssayCheap.com

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