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Transfer Pricing DecisionDivision Details:Division A (Selling Division):Variable Costs: $500,000Fixed Costs: $250,000Production Capacity: 30,000 unitsDivision B...

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Accounting

Transfer Pricing Decision

Division Details:

  • Division A (Selling Division):
    • Variable Costs: $500,000
    • Fixed Costs: $250,000
    • Production Capacity: 30,000 units
  • Division B (Buying Division):
    • Variable Costs: $400,000
    • Fixed Costs: $200,000
    • Demand: 25,000 units

Requirements:

  • Determine the transfer price per unit for Division B to acquire products from Division A using the cost-plus method.
  • Evaluate the impact on the overall profitability of the company.
  • Present the transfer pricing calculations in a comprehensive table.
  • Discuss the benefits and challenges of the chosen transfer pricing method.
  • Analyze how the transfer pricing strategy affects internal performance metrics.
  • Assess the alignment of transfer pricing with tax regulations and compliance.

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