Question 1
Negotiated transfer prices are often employed when ________.
◦ market prices are stable
◦ market prices are volatile
◦ market prices change by a regular percentage each year
◦ goal congruence is not a major objective
Question 2
Plish Company manufactures only one type of washing machine and has two divisions, the Compressor Division, and the Fabrication Division. The Compressor Division manufactures compressors for the Fabrication Division, which completes the washing machine and sells it to retailers. The Compressor Division "sells" compressors to the Fabrication Division. The market price for the Fabrication Division to purchase a compressor is $60.00. (Ignore changes in inventory.) The fixed costs for the Compressor Division are assumed to be the same over the range of 13,000-18,000 units. The fixed costs for the Fabrication Division are assumed to be $7.50 per unit at 18,000 units.
Compressor's costs per compressor are:
| Division fixed costs | $10.50 |
Fabrication
's costs per completed air conditioner are:
| Division fixed costs | $10.50 |
What is the market-based transfer price per compressor from the Compressor Division to the Fabrication Division?
◦ $16.50
◦ $33.00
◦ $40.50
◦ $60.00
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