In each of the cases below, assume Division X has a product that can be sold...

 

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In each of the cases below, assume Division X has a product that can be sold to outside customers or to Division Y of the same company. The managers of the divisions are evaluated based on their divisional profits. Case A B Division X: Capacity in units 92,000 101,000 Number of units being sold to outside customers 92,000 80,000 Selling price per unit to outside customers $ 59 $ 29 Variable costs per unit $ 23 $ 15 Fixed costs per unit (based on capacity) $ 8 $ 4 Division Y: Required: Number of units needed for production 21,000 21,000 Purchase price per unit now being paid to an outside supplier $ 51 $ 30 1. Refer to the data in case A above. Assume in this case $3 per unit in variable selling costs can be avoided on intracompany sales. a. What is the lowest acceptable transfer price from the perspective of the selling division? b. What is the highest acceptable transfer price from the perspective of the buying division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make decisions on their own, will a transfer probably take place? > Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required Required Required 1A 1B 1C What is the lowest acceptable transfer price from the perspective of the selling division? Lowest acceptable transfer price $ 51X Required 1A Required 1B > In each of the cases below, assume Division X has a product that can be sold to outside customers or to Division Y of the same company. The managers of the divisions are evaluated based on their divisional profits. Case A B Division X: Capacity in units 92,000 101,000 Number of units being sold to outside customers 92,000 80,000 Selling price per unit to outside customers $ 59 $ 29 Variable costs per unit $ 23 $ 15 Fixed costs per unit (based on capacity) $ 8 $ 4 Division Y: Required: Number of units needed for production 21,000 21,000 Purchase price per unit now being paid to an outside supplier $ 51 $ 30 1. Refer to the data in case A above. Assume in this case $3 per unit in variable selling costs can be avoided on intracompany sales. a. What is the lowest acceptable transfer price from the perspective of the selling division? b. What is the highest acceptable transfer price from the perspective of the buying division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make decisions on their own, will a transfer probably take place? > Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required Required Required 1A 1B 1C What is the lowest acceptable transfer price from the perspective of the selling division? Lowest acceptable transfer price $ 51X Required 1A Required 1B >

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