Question

Gorman Motors manufactures specialty tractors, has two divisions a Tractor Division and a Tire Division The Tractor Division can use the tres produced by the The Division. The man costs per tires Click the loon to view the costs and additional information) price per tre is $50. The Tire Division has the following Read the rec ents e d transfer price policy, what Requirement 1. Assume that the Tire Division has excess capacity, meaning that it can produce tres for the Tractor wision without giving up any of its current trees to outsiders. Gorman Motors has a ne is the lowest acceptable transfer price? What is the highest acceptable transfer price? (Assume the includes only the variable portion of conversion costs.) The lowest acceptable transfer price is the Tire Division's The highest acceptable transfer price is the Tre Division's Requiremo Moreno me the 53 includes only the variable portion of conversion o Begin by Directora con persire 525 Conversion costs per tire 53 (Assume the Gorman includes only the variable portion of conversion Requirem to producel what would be the finest transfer price try to us? What would be the range prices Faced manufacturing overhead cost for the year is expected to total $102.000. The Tre Division expects to manufacture 51.000 tires this year. The food manufacturing overhead per tire is $2 (5102.000 divided by 51,000 tires) When a Print Done Choose from any list or enter any number in the folds and then continue to the next question

Answer 1

1. Since there is spare capacity, lowest acceptable transfer prices is $28, tire divisions variable cost per tire

Highest acceptable transfer price is $50, market price

Transfer price =(28+2)*120%

=$36

3.since no excess capacity, fair price is the market price

I.e. $50 per tire