The Microprocessor Division of Zenith Systems Company Sells a Computer

question 147

Essay

The microprocessor division of Zenith Systems Company sells a computer module to the company's Assembly Division, which puts together the finished product (viz., guidance systems). The Microprocessor Division is currently working at capacity. The computer module costs $10,000 to manufacture, and it can be sold externally to companies for approximately $13,500 per unit.
Required:
1. Use the general transfer pricing rule to compute a transfer price for the computer module.
2. Explain the underlying logic of the general transfer pricing rule discussed in the chapter.

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Definitions:

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