700 Words Included Numbers Refencence If Needed Please Make Reference List As Well 3 2818540

700 words, included numbers refencence (if needed please make reference list as well) 3.4 required. Document Preview:

Transfer Pricing (780 WORDS included numbers and if reference list needed please make the reference list as well) The Australian Instrument Company (AIC) consists of the Semiconductor Division and the Process Control Division, each of which operates as an independent profit centre. The Semiconductor Division employs craftspeople who produce two different electronic components: the new high-performance Super-chip and an older product called Okay-chip. These two products have the following cost characteristics: Super-chip Okay-chip Direct materials $5 $2 Direct manufacturing labour, 3 hours × $20; 1 hour × $20 60 20 Annual overhead in the Semiconductor Division totals $400 000, all fixed. Due to the high skill level necessary for the craftspeople, the Semiconductor Division’s capacity is set at 45 000 hours per year. One customer orders a maximum of 15 000 Super-chips per year, at a price of $80 per chip. The rest of the Semiconductor Division’s capacity is devoted to the Okay-chip, for which there is unlimited demand at $26 per chip. The Process Control Division produces only one product, a process-control unit, with the following cost structure: ??direct materials (circuit board): $70 ??direct manufacturing labour: $45 (3 hours * $15) Fixed overhead costs of the Process Control Division are $80 000 per year. The current market price for the control unit is $132 per unit. A joint research project has just revealed that a single Super-chip could be substituted for the circuit board currently used to make the process-control unit. Direct labour cost of the process-control unit would not change. The improved process-control unit could be sold for $145 Required 3. What transfer price, or range of prices, would ensure goal congruence among the division managers? Show your calculations and provide an explanation. 4. If labour capacity in the Semiconductor Division were 60 000 hours instead…

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