(Appendix 11A) Oberley Products, Inc., has a Receiver Division that manufactures and sells a number of products, including a standard receiver that could be used by another division in the company, the Industrial Products Division, in one of its products. Data concerning that receiver appear below:
The Industrial Products Division is currently purchasing 5,000 of these receivers per year from an overseas supplier at a cost of $58 per receiver.
-What is the maximum price that the Industrial Products Division should be willing to pay for receivers transferred from the Receiver Division?
A) $52 per unit
B) $19 per unit
C) $58 per unit
D) $33 per unit

Question

(Appendix 11A) Oberley Products, Inc., has a Receiver Division that manufactures and sells a number of products, including a standard receiver that could be used by another division in the company, the Industrial Products Division, in one of its products. Data concerning that receiver appear below:
  The Industrial Products Division is currently purchasing 5,000 of these receivers per year from an overseas supplier at a cost of $58 per receiver.
-What is the maximum price that the Industrial Products Division should be willing to pay for receivers transferred from the Receiver Division?
A) $52 per unit 
B) $19 per unit 
C) $58 per unit 
D) $33 per unit

Quizplus · Accepted Answer

From the perspective of the purchasing division, the transfer is financially attractive if and only if:
Transfer price < Cost of buying from outside supplier
Transfer price < $58 per unit