Department A produces product A1. A1 can be sold to internal or outside parties. Department B produces
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Question:
Department A produces product A1. A1 can be sold to internal or outside parties. | | | | | | |
Department B produces product SAM. | | | | | | |
Prodcution information is as follows. | | | | | | |
Dept.A | | | | Dept B | | |
Total fixed cost $1500000 | | | | Total fixed cost $25000 | | |
Variable cost per unit $175 | | | | Variable cost per unit (excluding transfer price) $350 | | |
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Both departments have extra production capacity. The market demand is as follows. | | | | | | |
1. For A1, 4500 units can be sold at $350 per unit. selling price will be changed $1 for every 5 units sold. | | | | | | |
2. For SAM, 500 units can be sold at $1100 per unit | | | | | | |
Selling price per unit will be changed $75 for every 125 units sold. | | | | | | |
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Dept A uses the market price as the transfer price to Dept B. | | | | | | |
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Calculate selling price of SAM for the maximum profit. |
Related Book For
Mathematical Applications for the Management Life and Social Sciences
ISBN: 978-1305108042
11th edition
Authors: Ronald J. Harshbarger, James J. Reynolds
Posted Date: