Sherwin Company makes bicycles. Various divisions make components and transfer them to the Dayton division for assembly into final products. The Dayton division can also buy components from external suppliers. The Toledo division makes the wheels, and it also sells wheels to external customers. All divisions are profit centers, and managers are free to negotiate transfer prices. Prices and costs for the Toledo and Dayton divisions are as follows:

Fixed costs in both divisions will be unaffected by the transfer of wheels from Toledo to Dayton.
1. Compute the maximum transfer price per wheel the Dayton division would be willing to pay to buy wheels from the Toledo division.
2. Compute the minimum transfer price per wheel at which the Toledo division would be willing to produce and sell wheels to the Dayton division. Assume that Toledo has excesscapacity.

  • CreatedNovember 19, 2014
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