$15-48.$ Transfer Pricing: Performance Evaluation Issues

LO $15-2,3)$

LGA's Energy Division is operating at capacity. It has been asked by Products Division to supply it a thermal switch, which Energy sells to its regular customers for $$72$ each. Products, which is operating at $75$ percent capacity, is willing to pay $$48$ each for the switch. Products will put the switch into a sensor that it is manufacturing on a cost$-$plus basis for a larger manufacturing firm, based in South America. Energy has a $$40$ variable cost of producing the switch.

The cost of the sensor as built by Products follows:

$\backslash$table$[[$Purchased parts$-$outside vendors,$$216$