The Machining Division Makes a Component Part That the Assembly

question 4

Essay

The Machining division makes a component part that the Assembly division needs for a new product.The Machining division's variable cost of manufacturing the component is $25 per
a.Calculate the cost-based transfer price that the Machining division should charge the Assembly division.
b.Calculate the market-based transfer price that the Machining division should charge the Assembly division.
c.What arguments would the Machining division's manager and the Assembly division's manager make in an attempt to get the price each wants?

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Definitions:

Collection Float

The time span between when a check is deposited and when the funds are actually available in the account, reflecting processing time.

Checks

Checks are written, dated, and signed instruments that direct a bank to pay a specific sum of money to the bearer or a designated party.

Bank

A financial institution licensed to receive deposits and make loans.