Refer to the information for Aulman Inc. above. Also, although the Furniture Division has been operating...

 

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Refer to the information for Aulman Inc. above. Also, although the Furniture Division has been operating at capacity (50,000 dressers per year), it expects to produce and sell only 40,000 dress- ers for $40 each next year. The Furniture Division incurs variable costs of $14 per dresser. The company policy is that all transfer prices are negotiated by the divisions involved. Required: 1. What is the maximum transfer price? Which division sets it? 2. What is the minimum transfer price? Which division sets it? 3. Suppose that the two divisions agree on a transfer price of $35. What is the change in operat- ing income for the Furniture Division? For the Motel Division? For Aulman Inc. as a whole? Refer to the information for Aulman Inc. above. Also, although the Furniture Division has been operating at capacity (50,000 dressers per year), it expects to produce and sell only 40,000 dress- ers for $40 each next year. The Furniture Division incurs variable costs of $14 per dresser. The company policy is that all transfer prices are negotiated by the divisions involved. Required: 1. What is the maximum transfer price? Which division sets it? 2. What is the minimum transfer price? Which division sets it? 3. Suppose that the two divisions agree on a transfer price of $35. What is the change in operat- ing income for the Furniture Division? For the Motel Division? For Aulman Inc. as a whole?

Answer rating: 100% (QA)

Lets tackle each requirement step by step 1 Maximum Transfer Price and Division Setting It The maxim... View the full answer