Hitek, Inc. has 2 divisions, Diodes and Boards. The diode can be sold internally or externally. If sold externally, the sales price is $15 per diode. The Boards division needs 3 diodes for each electronic board it produces. The external sales prices and costs are:
Homework Answers
correct option is ""A"
Minimum price :
Since Diode's division can sell all of its output externally ,it will lose contribution from external sales if internal transfer is made .
So the minimum price must equals to market price it can realized while to selling to external customers = $ 15 per diode .
Maximum price
Board division will be willing to pay price equals to contribution it has left with without including the internal transfer cost of diode so that no profit no loss situation is reached (price below which it will be in profit situation)
Contribution Board division has without including diode cost =price -variable cost
= 16.5 -9
= 7.5
so contribution per Diode = 7.5 /3 = $ 2.5 per Diode [it requires 3 diode to produce one board ]
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Hitek, Inc. has 2 divisions, Diodes and Boards. The diode can be
sold internally or externally....
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