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Best Practices, Inc., is a management consulting firm. Its Corporate Division advises private
firms on the adoption and use of cost management systems. Government Division consults with
state and local governments. Government Division has a client that is interested in implementing
an activity-based costing system in its public works department. The division
Best Practices, Inc., is a management consulting firm. Its Corporate Division advises private
firms on the adoption and use of cost management systems. Government Division consults with
state and local governments. Government Division has a client that is interested in implementing
an activity-based costing system in its public works department. The division
Solution
a)
Minimum transfer price = $600 per hour
2) Yes
b) 1) Since Corporate division is not operating at capacity, minimum transfer price should be
equal to its variable cost
Minimum transfer price = $200 per hour
2) Yes
Best Practices- Inc-- is a management consulting firm- Its Corporate D.docx

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Best Practices- Inc-- is a management consulting firm- Its Corporate D.docx

  • 1. Best Practices, Inc., is a management consulting firm. Its Corporate Division advises private firms on the adoption and use of cost management systems. Government Division consults with state and local governments. Government Division has a client that is interested in implementing an activity-based costing system in its public works department. The division Best Practices, Inc., is a management consulting firm. Its Corporate Division advises private firms on the adoption and use of cost management systems. Government Division consults with state and local governments. Government Division has a client that is interested in implementing an activity-based costing system in its public works department. The division Solution a) Minimum transfer price = $600 per hour 2) Yes b) 1) Since Corporate division is not operating at capacity, minimum transfer price should be equal to its variable cost Minimum transfer price = $200 per hour 2) Yes