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The document discusses the operations of Computer Solutions Corporation, focusing on the Computer Chip Division's production and pricing of a 'super chip.' It outlines the selling price, costs, and potential transfer pricing scenarios between divisions, including minimum and maximum transfer prices and their impact on corporate profits. Various questions are posed regarding the financial implications of transferring chips internally versus purchasing from external suppliers.

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Shane Villacorta Ledres
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46 views2 pages

Inbound 8647775630503742061

The document discusses the operations of Computer Solutions Corporation, focusing on the Computer Chip Division's production and pricing of a 'super chip.' It outlines the selling price, costs, and potential transfer pricing scenarios between divisions, including minimum and maximum transfer prices and their impact on corporate profits. Various questions are posed regarding the financial implications of transferring chips internally versus purchasing from external suppliers.

Uploaded by

Shane Villacorta Ledres
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

BSA 2A_Responsibility Accounting and Transfer Pricing

Computer Solutions Corporation manufactures and sells various high-tech office automation products.
Two divisions of Office Products Inc. are the Computer Chip Division and the Computer Division. The
Computer Chip Division manufactures one product, a "super chip," that can be used by both the
Computer Division and other external customers. The following information is available on this month's
operations in the Computer Chip Division:

Selling price per chip $50


Variable costs per chip $20
Fixed production costs $60,000
Fixed SG&A costs $90,000
Monthly capacity 10,000 chips
External sales 6,000 chips
Internal sales 0 chips

Presently, the Computer Division purchases no chips from the Computer Chips Division, but instead pays
$45 to an external supplier for the 4,000 chips it needs each month.

1. Refer to Computer Solutions Corporation. Assume that next month's costs and levels of operations in the
Computer and Computer Chip Divisions are similar to this month. What is the minimum of the transfer price
range for a possible transfer of the super chip from one division to the other?
a. $50
b. $45
c. $20
d. $35
2. Refer to Computer Solutions Corporation. Assume that next month's costs and levels of operations in the
Computer and Computer Chip Divisions are similar to this month. What is the maximum of the transfer price
range for a possible transfer of the chip from one division to the other?
a. $50
b. $45
c. $35
d. $30
3. Refer to Computer Solutions Corporation. Two possible transfer prices (for 4,000 units) are under
consideration by the two divisions: $35 and $40. Corporate profits would be ___________ if $35 is selected
as the transfer price rather than $40.
a. $20,000 larger
b. $40,000 larger
c. $20,000 smaller
d. the same
4. Refer to Computer Solutions Corporation. If a transfer between the two divisions is arranged next period at a
price (on 4,000 units of super chips) of $40, total profits in the Computer Chip division will
a. rise by $20,000 compared to the prior period.
b. drop by $40,000 compared to the prior period.
c. drop by $20,000 compared to the prior period.
d. rise by $80,000 compared to the prior period.

5. Refer to Computer Solutions Corporation. Assume, for this question only, that the Computer Chip Division is
selling all that it can produce to external buyers for $50 per unit. How would overall corporate profits be
affected if it sells 4,000 units to the Computer Division at $45? (Assume that the Computer Division can
purchase the super chip from an outside supplier for $45.)
a. no effect
b. $20,000 increase
c. $20,000 decrease
d. $90,000 increase

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