Northeastern Tell wants its name imprinted on the telephone set. Its Mexican supplier has quoted a...

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Northeastern Tell wants its name imprinted on the telephone set. Its Mexican supplier has quoted a price of $31.00 per set. Southwestern Ringer will have to buy a stamping machine at a net cost of $20,000. Southwestern no longer can produce at full capacity by dropping its sales price to $27.50, so the manager has abandoned that idea. Required: Determine whether there should now be a transfer. What transfer price will result in the managers benefiting equally from the transfer? Continuing the TAA example from the previous part, the Northeastern marketing staff has decided against imprinting its name on the phone. However, they believe that if the color is changed to fuchsia, 30,000 specialty phone-answering machine-radios can be sold in the greater Toronto area. The Mexican supplier has quoted a price of $26.50 for an order of this size due to the higher cost of fuchsin. Southwestern already produces fuchsia-colored phones for its Vancouver market and will incur no extra costs in changing the color. Required: Calculate whether this transfer should occur. If so, what transfer price will share the differential profits equally between the two managers? The Northeastern marketing staff has always been known for their creativity. Now they are considering changing the color of their specialty phone product to paisley. The Mexican supplier will not even bid on this, and no other supplier has been found. Northeastern believes that 27,500 of these specialty phone products can be sold at $200 each in the Ottawa market. The costs to produce this product, other than the cost of the Southwestern phone set are $183 each. Required: Determine whether a transfer is profitable for TAA. If so, suggest a transfer price that shares TAA's differential profit 75% for Northeastern and 25% for Southwestern. Northeastern Tell wants its name imprinted on the telephone set. Its Mexican supplier has quoted a price of $31.00 per set. Southwestern Ringer will have to buy a stamping machine at a net cost of $20,000. Southwestern no longer can produce at full capacity by dropping its sales price to $27.50, so the manager has abandoned that idea. Required: Determine whether there should now be a transfer. What transfer price will result in the managers benefiting equally from the transfer? Continuing the TAA example from the previous part, the Northeastern marketing staff has decided against imprinting its name on the phone. However, they believe that if the color is changed to fuchsia, 30,000 specialty phone-answering machine-radios can be sold in the greater Toronto area. The Mexican supplier has quoted a price of $26.50 for an order of this size due to the higher cost of fuchsin. Southwestern already produces fuchsia-colored phones for its Vancouver market and will incur no extra costs in changing the color. Required: Calculate whether this transfer should occur. If so, what transfer price will share the differential profits equally between the two managers? The Northeastern marketing staff has always been known for their creativity. Now they are considering changing the color of their specialty phone product to paisley. The Mexican supplier will not even bid on this, and no other supplier has been found. Northeastern believes that 27,500 of these specialty phone products can be sold at $200 each in the Ottawa market. The costs to produce this product, other than the cost of the Southwestern phone set are $183 each. Required: Determine whether a transfer is profitable for TAA. If so, suggest a transfer price that shares TAA's differential profit 75% for Northeastern and 25% for Southwestern.

Answer rating: 100% (QA)

1 Since Southwestern Ringer is no longer able to produce at full capacity there is an opportunity for a transfer from Northeastern Tell to utilize the ... View the full answer