(Appendix 11A) Ahart Products, Inc., has a Transmitter Division that manufactures and sells a number of products, including a standard transmitter that could be used by another division in the company, the Remote Devices Division, in one of its products. Data concerning that transmitter appear below:
The Remote Devices Division is currently purchasing 4,000 of these transmitters per year from an overseas supplier at a cost of $59 per transmitter.
-What is the maximum price that the Remote Devices Division should be willing to pay for transmitters transferred from the Transmitter Division?
A) $8 per unit
B) $50 per unit
C) $59 per unit
D) $42 per unit

Question

(Appendix 11A) Ahart Products, Inc., has a Transmitter Division that manufactures and sells a number of products, including a standard transmitter that could be used by another division in the company, the Remote Devices Division, in one of its products. Data concerning that transmitter appear below:
  The Remote Devices Division is currently purchasing 4,000 of these transmitters per year from an overseas supplier at a cost of $59 per transmitter.
-What is the maximum price that the Remote Devices Division should be willing to pay for transmitters transferred from the Transmitter Division?
A) $8 per unit 
B) $50 per unit 
C) $59 per unit 
D) $42 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 < $59 per unit