Cambridge Products manufactures and sells cat toys and cat beds.The Bed Division incurs the following costs for the production of a single cat bed when 5,000 beds are produced each year.

The company sells cat beds to various pet stores for $26.00.The Toy Division is doing a promotion whereby each customer that purchases ten cat toys during the months of January,February,and March will receive a free cat bed.The Toy Division would like to purchase these beds from the Bed Division.
Assuming the Bed Division is at full capacity,what is the optimal transfer price?
A)$ 26.00
B)$13.50
C)$16.00
D)$18.00
E)None of the answer choices is correct.

Question

Cambridge Products manufactures and sells cat toys and cat beds.The Bed Division incurs the following costs for the production of a single cat bed when 5,000 beds are produced each year.

The company sells cat beds to various pet stores for $26.00.The Toy Division is doing a promotion whereby each customer that purchases ten cat toys during the months of January,February,and March will receive a free cat bed.The Toy Division would like to purchase these beds from the Bed Division.
Assuming the Bed Division is at full capacity,what is the optimal transfer price?
A)$ 26.00 
B)$13.50 
C)$16.00 
D)$18.00 
E)None of the answer choices is correct.

Quizplus · Accepted Answer

The Answer of Cambridge Products manufactures and sells cat toys and cat beds.The Bed Division incurs the following costs for the production of a single cat bed when 5,000 beds are produced each year.

The company sells cat beds to various pet stores for $26.00.The Toy Division is doing a promotion whereby each customer that purchases ten cat toys during the months of January,February,and March will receive a free cat bed.The Toy Division would like to purchase these beds from the Bed Division.
Assuming the Bed Division is at full capacity,what is the optimal transfer price?
A)$ 26.00 
B)$13.50 
C)$16.00 
D)$18.00 
E)None of the answer choices is correct.

Cambridge Products Manufactures and Sells Cat Toys and Cat Beds