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Sako Companys Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data

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Answer #1

Solution 1a:
If Audio Division is currently selling only 53,000 speaker each year to outside customers at the stated $41 price, it means division is having spare capacity of 9000 speaker.

Lowest acceptable transfer price from the perspective of the audio Division = Variable cost per speaker
= $17

Solution 1b:
Highest acceptable transfer price from the perspective of the Hi-fi Division = marker price from outside supplier = $35 per speaker

Solution 1c:
Range of acceptable transfer prices (if any) between the two divisions = $17 to $35

Yes, the managers of the Audio and Hi-fi Divisions likely to voluntarily agree to a transfer price for 9,000 speakers.

Solution 1d:
Yes, from stand point of company also, this transfer should take place.


Solution 2a:
If Audio Division can sell all of its speaker to outside customers for $41 per speaker, lowest acceptable transfer price from the perspective of the audio Division = selling price i.e. $41 per speaker

Solution 2b:
Highest acceptable transfer price from the perspective of the Hi-fi Division = marker price from outside supplier = $35 per speaker

Solution 2c:
Range of acceptable transfer prices (if any) between the two divisions = Range of acceptable transfer price cannot be established. (as lowest acceptable transfer price for audio division is higher than highest acceptable transfer price of Hifi division)
Manager of Audiot and Hi -fi division is not likely to voluntarily agree to a transfer price for 9,000 speakers.

Solution 2d:
From stand point of the entire company also, this transfer should not take place.

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