The max of Transfer price

If B can buy it on the external market for 16 then the answer would indeed be 16. I don't know if you have typed the question in full, but BPP are obviously assuming that the external market price is the price that A could sell it at (not the price that B could buy it at)

Thank you John. I understand your meaning.But what I typed it's already the whole Que.Now I got clearer about TP. Thank you so much.

BPP should have made it more clear :-)

Hi John, Division X produces 2 separate material Material G and Material D each unit of material G and D take the same amount of labour time to produce. MAterial G is only sold to external customer at a price of $14. The VC incurred $9 and fixed overheads amount to $1 per unit . The budgeted production for G is 2700 units Material D is sold to div Y only. The transfer price that has been set for each unit is full cost + 10 % . This material can be purchased external for $26 but div Y have been told by management that they must buy the material from div x . Div x incur VC of $20 and FC of $8 in producing material D budgeted production and sales are 2000 units div X has spare capacity. A.What is the likely reaction by Div x and Div y to the TP being set at full cost plus 10% recommend the reason a range of TP of material D B.And second part of div x is at full capacity in terms of labour recommend a new range of TPnfor material D . I have looked at your lecture and if looking at requirement A the MC of div X is 28 and division x cannot sell less than that and the min price will be set by X but in that case also div Y is making a loss of 1600 if full cost plus 10 percent is used so it will result in goal incongruncy and also the autonomy is not there as div Y must buy from div X but in that case what will be the TP will it be just 28? Or div y will purchase it from external supplier. At $ 26. Part b I know the the TP will be MC + opportunity cost which would be lost contribution from material G but I'm confused on the calculation can you do it for me pleAse and then the transfer price too Thanks Noureen

Also I forgot to supply information about division Y div Y uses one unit of material D to make one unit of finished product . It incurs additional cost of $ 30 per finished product and anticipates that it will produce and sell 2000 finished product . The selling price is $60.

If this is a past exam question then please tell me which exam. Otherwise we really cannot provide full answers to questions that you find elsewhere.

No this not the past exam one of the exam kits..

Then tell me which question from which exam kit. If I have the exam kit I will look at it, but we cannot provide full answers to full questions here!