Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed



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solutions-manual-to-bhimani-et-al-management-and-cost-accounting-pearson-2012-1
18.13 Transfer-pricing
dispute.
(20 min)
1
The company as a whole will not benefit if Division C buys on the outside market. Purchase costs from outsider, 1,000 units
×
€135
€135,000 Deduct Savings invariable costs by reducing
Division A output, 1,000 units
×
€120 120,000 Net cost (benefit) to company as a whole by
buying from outside
€15,000
2
The company will benefit if C purchases from the outside supplier Purchase costs from outsider, 1,000 units
× €135
€135,000 Deduct Savings invariable costs,
1,000 units
× €120
€120,000
Savings due to As equipment and facilities being assigned to other operations
18,000 138,000 Net cost (benefit) to company as a whole by buying from outside
€(3,000)
3
The company will benefit if C purchases from the outside supplier Purchase costs from outsider, 1,000 units
× €115
€115,000 Deduct Savings invariable costs by reducing
Division A output,
1,000 units
× €120 120,000 Net cost (benefit) to company as a whole by buying from outside
€(5,000)


Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012 The three requirements are summarised below (in thousands

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