Part B

Exercise 22-16 (Part Level Submission) Crede Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of 9.60 from an outside vendor Division A needs 11,500 lamps for the coming year. Division B has the capacity to manufacture 50,300 lamps annually. Sales to outside customers are estimated at 38,800 lamps for the next year. Reading lamps are sold at 11.62 each. Variable costs are 6.83 per lamp and include 1.44 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is 79,900 Consider the following independent situations. (a) Your answer is correct. What should be the minimum transfer price accepted by Division B for the 11,500 lamps and the maximum transfer price paid by Division A? (Round answers to 2 decimal places, e.g. 10.50.) Minimum transfer price accepted by Division B 5.39 per unit Maximum transfer price paid by Division A 9.60 per unit SHOW SOLUTION SHOW ANSWER LINK TO TEXT VIDEO: SIMILAR EXERCISE Attempts: 1 of 3 used (b) Suppose Division B could use the excess capacity to produce and sell externally 20,900 units of a new product at a price of 8.46 per unit. The variable cost for this new product is 6.22 per unit. What should be the minimum transfer price accepted by Division B for the 11,500 lamps and the maximum transfer price paid by Division A? (Round answers to 2 decimal places, e.g. 10.50.) Minimum transfer price accepted by Division B per unit Maximum transfer price paid by Division A per unit