Electro Ltd has two divisions: Metal and Assembly. The Metal division transfers metal rolls to the Assembly division at a predetermined transfer price. The Metal division’s standard variable production cost per tonne is $450 and variable selling cost is $10. The Metal division can sell all its metal rolls to outside buyers at $860 per tonne in a competitive market. The Metal division has the capacity to produce 10,000 tonnes of metal rolls per year and currently sells 8,000 tonnes of metal rolls to external customers but none to Assembly division.

Assembly Division has approached Metal Division to purchase 2,000 tonnes of metal rolls. Based on the general transfer price rule, the per unit transfer price is:

Which of the following statements about setting transfer prices is incorrect?

Always Winey has two divisions: Compressor Division and Assembly Division. Assembly Division buys compressors from Compressor Division. The manufacturing cost per compressor is $300, which is composed of $240 variable cost and $60 allocated fixed overhead. The external market price for compressors is $420 per unit. Assume that Compressor Division has enough capacity to satisfy both external and internal demand. Calculate the transfer price charged to Assembly Division assuming that the general transfer pricing rule is applied.

 What type of responsibility centres are the following most likely to be?:

1. The IT department of a university
2. A hair salon located in Kingsford which is part of a national chain
3. The sales call centre of a telecommunications company