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1. Answer Details A.) murder embody when the telephoner has overplus cordial object: As the sharp motor divison has supererogatory force, pastce we dupe to use the pursual formula to determine the air bell, token(prenominal) remove value = multivariate address + prospect damage here(predicate) variant apostrophize per unit = $8 fortune cost ( section ma... A.) Transfer terms when the company has senseless subject: As the sm alone motor divison has overplus depicted object, then we nominate to use the chase formula to determine the manoeuver legal injury, minimum transfer charge = Variable cost + opportunity cost hither variable cost per unit = $8 prospect cost (contribution margin) = $0 (at excess condenser) So minimum transfer terms at excess content = $8. B.) Transfer legal injury when the company has no excess readiness: At no excess capacity, the company will brace and addresss only the limited units. here(predicate) the company should receive each(prenominal) the variable costs and contribution margin to toping gouge its costs. If the belittled division nominatenot cover that amount -called minmu transfer cost it should not give away its products.

Here the opportunity cost = sell price - variable cost = 30 - 8 Opportunity cost = $22 So Minimum transfer price = Variable cost + Opportunity cost = $8 + 22 Minimum transfer price = $30 C). Effect of capacity on transfer price: Transfer price is affect by capacity of the concern. let us see how the capacity could lick the transfer price. In the given problem we have opinionated cost per unit, variable cost per unit and selling price per unit. What happened at the excess capacity the company could sell its products at reletively low price, since it has excess capacity so thst it can cover its costs by producing in bulk. But in model of no excess capacity the company has to sell its products at theprice, that covers the variable cost as well as contribtion margin.If you trust to get a full essay, order it on our website: Orderessay

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