The procurement division of Sea Monkeys Inc, purchases and processes salt, water conditioner, and brine shrimp eggs,
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Question:
The procurement division produces and sells 600,000 sea monkey packets per year, its maximum capacity (this is the capacity used for determining the predetermined overhead rate). The per unit costs associated with one silver packet are as follows:
Direct materials $2.50
Direct labor $1.00
Variable factory overhead $0.50
Fixed factory overhead $0.75
Total $4.75
What is the range of transfer prices such that the procurement and finishing divisions should be mutually willing to transact for the 600,000 packets?
Related Book For
Matching Supply with Demand An Introduction to Operations Management
ISBN: 978-0073525204
3rd edition
Authors: Gerard Cachon, Christian Terwiesch
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