Use the information below to answer the following question(s).Crush Company makes internal transfers at 180% of full cost.The Soda Refining division purchases 30,000 containers of carbonated water per day, on average, from a local supplier, who delivers the water for $30 per container via an external shipper.In order to reduce costs the company located an independent producer in Manitoba who is willing to sell 30,000 containers at $20 each, delivered to Crush Company's shipping division in Manitoba.The company's Shipping Division in Manitoba can ship the 30,000 containers at a variable cost of $2.50 per container and a full cost, based on practical capacity, of $4.00 per container.When the company's Manitoba shipping division ships for external customers is charges $6.00 per container.
-When companies are unable to choose a transfer-pricing method which meets the requirements of the divisions concerned, they may use
A)cost pricing.
B)dual pricing.
C)situational pricing.
D)market pricing.
E)pro-rating pricing.

Question

Quizplus · Accepted Answer

Dual pricing allows for different pricing methods to be used for internal transfers and external sales, which can accommodate the needs of both divisions involved in the transfer. In this scenario, Crush Company can use dual pricing to set a fair price for the internal transfer of carbonated water containers between the Soda Refining division and the Shipping division in Manitoba, while still charging the external customers a market price of $6.00 per container.

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