Question

Question 1 Swifty Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $11 from an outside vendor. Division A needs 10,000 lamps for the coming year. Division B has the capacity to manufacture 46,200 lamps annually. Sales to outside customers are estimated at 36,200 lamps for the next year. Reading lamps are sold at $12 each. Variable costs are $7 per lamp and include $1 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $85,300. Consider the following independent situations.

What should be the minimum transfer price accepted by Division B for the 10,000 lamps and the maximum transfer price paid by Division A? Minimum transfer price accepted by Division B $ per unit Maximum transfer price paid by Division A $ per unit

Suppose Division B could use the excess capacity to produce and sell externally 15,000 units of a new product at a price of $7 per unit. The variable cost for this new product is $5 per unit. What should be the minimum transfer price accepted by Division B for the 10,000 lamps and the maximum transfer price paid by Division A? Minimum transfer price accepted by Division B $ per unit Maximum transfer price paid by Division A $ per unit

If Division A needs 15,625 lamps instead of 10,000 during the next year, what should be the minimum transfer price accepted by Division B and the maximum transfer price paid by Division A? (Round answers to 2 decimal places, e.g. 10.50.) Minimum transfer price accepted by Division B $ per unit Maximum transfer price paid by Division A $ per unit

Answer 1

Ansue Drision B mnimum Tranefe i acepho b veriabl cast VC Hinte Divis ton B6 pesun minimum marimum tansfi peite paiod by Diviston A Pure hase iet. pevchascs fom outsride Verdons f1 perunit 4kente minima m tenstes puice aceepicd by Division B Conhiaton -5 2 Conhibution = 15,000 Xà uired 30,000

equird Contibution Cast unts to be tanforid'nene 30,000 18000 - 3. So mimmum ter vision B mnimum ans price accepted ba Dirvision B9 penunit Nou maximum tansrice accepta by Divis jon A s Purchace price iit pvehaseom artade er amp nd ors

Drrision B Mnimun fnsf ce altepled b 19- 7 Con toibon .trlonal caau procuttin cya 36,200 46, a0o 0,000 hee Loss dolce = 5 G2 ass ohition orluity unit Cost uired unis 3 1250 So minimum trans pie alceptd by a Division B is :minimumhansf price acepted by E por unit

Division A maximum tranfo prite a ceetd by Prcho se prie 1 puncha e tiom outd Vendovs= .mai mumTp