If J Div was granted autonomy to set the transfer price, what will be the likely range
Question:
If J Div was granted autonomy to set the transfer price, what will be the likely range of the transfer prices? Recommend the transfer prices that will maximize the profits of the company as a whole.
J Div M Div
Annual max capacity (unit) 100,000 units 60,000 units
Annual sales volume (units)
External sales 60,000 units 48,000 units
Transfer sales (to M Div) 48,000 units -
unit selling price (external) $400 $1,000
Unit variable manufacturing costs $300 $310 (exclude cost of material from J Div)
Annual fixed overheads $5,000,000 $6,000,000
M Div can buy from external supplier (similar material from J Div) at $350 per unit.
Expert Answer:
To determine the transfer price that maximizes the profits of the company as a whole we ... View the full answer
