HB Inc. has two divisions: Divisions H and B. Division H makes a machine component, Product...
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HB Inc. has two divisions: Divisions H and B. Division H makes a machine component, Product MC24, it sells to outside customers for $116.00 per unit. To make one unit of MC24, Division H incurs $17.00 for direct materials, $13.00 for direct labor, $14.50 for variable manufacturing overhead, and $21.20 for fixed manufacturing overhead. Division H has enough idle capacity to make 2,000 units of MC24 per month without interfering with outside sales. Division B has been purchasing an identical component from an outside supplier for $120.30 per unit and needs 2,500 units of this component each month. Division B has determined it could use MC24 in production if Division H is willing to provide the units. HB Inc.'s CFO has suggested internal trade would be good for the company and may improve organizational culture by promoting cooperation. Specifically, the CFO has suggested that Division B buy MC24 from Division H instead of buying the identical component from the outside supplier. If the divisions negotiate a transfer price for these components, then the transfer price would lie within what limits? O greater than $58.80 and less than $116.00 O greater than $58.80 and less than $120.30 O greater than $65.70 and less than $120.30 D greater than $44.50 and less than $116.00 greater than $44.50 and less than $120.30 HB Inc. has two divisions: Divisions H and B. Division H makes a machine component, Product MC24, it sells to outside customers for $116.00 per unit. To make one unit of MC24, Division H incurs $17.00 for direct materials, $13.00 for direct labor, $14.50 for variable manufacturing overhead, and $21.20 for fixed manufacturing overhead. Division H has enough idle capacity to make 2,000 units of MC24 per month without interfering with outside sales. Division B has been purchasing an identical component from an outside supplier for $120.30 per unit and needs 2,500 units of this component each month. Division B has determined it could use MC24 in production if Division H is willing to provide the units. HB Inc.'s CFO has suggested internal trade would be good for the company and may improve organizational culture by promoting cooperation. Specifically, the CFO has suggested that Division B buy MC24 from Division H instead of buying the identical component from the outside supplier. If the divisions negotiate a transfer price for these components, then the transfer price would lie within what limits? O greater than $58.80 and less than $116.00 O greater than $58.80 and less than $120.30 O greater than $65.70 and less than $120.30 D greater than $44.50 and less than $116.00 greater than $44.50 and less than $120.30
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