ChinFizz Ltd. produces kitchen tools, and operates several divisions as profit centers Division M produces a...

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ChinFizz Ltd. produces kitchen tools, and operates several divisions as profit centers Division M produces a product that it sells to other companies for $16 per unit. It has a maximum capacity of 45,000 units per year. Variable manufacturing cost is $9 per unit, and variable marketing cost is $3 per unit. Total fixed manufacturing overhead is $200,000, and fixed marketing costs are $60,000. Division N of GinFizz Ltd. is planning to produce un innovative new tool that requires the use of Division M's product (or one very similar). Division N will require 30,000 units of Division M's product. Currently. Division N can purchase a product equivalent to Division M's from Company X for $15 per unit. However, GinFizz Ltd. is considering transferring the necessary product from Division M to Division N. L Required: a. Assume Division M is operating at full capacity of 45,000 units per year and Division N accepts no partial order. What would be the minimum and maximum transfer price? Should the transfer take place? ChinFizz Ltd. produces kitchen tools, and operates several divisions as profit centers Division M produces a product that it sells to other companies for $16 per unit. It has a maximum capacity of 45,000 units per year. Variable manufacturing cost is $9 per unit, and variable marketing cost is $3 per unit. Total fixed manufacturing overhead is $200,000, and fixed marketing costs are $60,000. Division N of GinFizz Ltd. is planning to produce un innovative new tool that requires the use of Division M's product (or one very similar). Division N will require 30,000 units of Division M's product. Currently. Division N can purchase a product equivalent to Division M's from Company X for $15 per unit. However, GinFizz Ltd. is considering transferring the necessary product from Division M to Division N. L Required: a. Assume Division M is operating at full capacity of 45,000 units per year and Division N accepts no partial order. What would be the minimum and maximum transfer price? Should the transfer take place?

Answer rating: 100% (QA)

Value in Affect of purchasing costs of Division N when transfer price consider Number of units requi... View the full answer