Division Y has asked Division X of the same company to supply it with 8,800 units of part L763 this year to use in one of its products. Division Y has received a bid from an outside supplier for the parts at a price of $52 per unit. Division X has the capacity to produce 35,200 units of part L763 per year. Division X expects to sell 31,680 units of part L763 to outside customers this year at a price of $56.80 per unit. To fill the order from Division Y, Division X would have to cut back its sales to outside customers. Division X produces part L763 at a variable cost of $44 per unit. The cost of packing and shipping the parts for outside customers is $2 per unit. These packing and shipping costs would not have to be incurred on sales of the parts to Division Y.Required:a. What is the range of transfer prices within which both the Divisions' profits would increase as a result of agreeing to the transfer of 8,800 parts this year from Division X to Division Y? (Round your final answers to 2 decimal places.)b. Is it in the best interests of the overall company for this transfer to take place?
Correct Answer:
Verified
View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Q310: Sauseda Corporation has two operating divisions-an Inland
Q311: Prejean Products, Incorporated, has a Relay Division
Q312: Zumsteg Products, Incorporated, has a Pump Division
Q313: Lank Products, Incorporated, has a Transmitter Division
Q314: Leslie Company operates a cafeteria for the
Q316: Stibbins Products, Incorporated, has a Receiver Division
Q317: Liapis Products, Incorporated, has a Valve Division
Q318: Ulrich Company has a Castings Division which
Q319: Manni Products, Incorporated, has a Pump Division
Q320: Fyodor Corporation has a Parts Division that
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents