LG Electronics Ltd operates as a decentralised multidivisional company. The Electronic Division of LG Electronics Ltd manufactures smart televisions, each of which requires one square metre of special integrated circuit boards. The Electronic division can purchase this material from an external supplier at $100 plus a $5 inspection cost per square metre. 

Alternatively, it could purchase this material internally from the Assembly Division of LG Electronics Ltd. The Assembly Division’s incremental (variable) cost for manufacturing one square metre of special integrated circuit boards needed per television is $80. The Assembly Division is currently operating at 60% of its capacity of 20,000 square metres per month. It currently sells one square metre of special integrated circuit boards to external customers at $90 per square metre. The Electronic Division will initially manufacture 7,500 smart television units per month. 

REQUIRED: 

What is the minimum price at which the Assembly Division of LG Electronics Ltd would be willing to sell one square metre of special integrated circuit boards to the Electronic Division of LG Electronics Ltd?

Answer rating: 100% (QA)

Requirement A Spare capacity 40 of total capacity of assembly division 40 of 20000 square meter 8000 ... View the full answer