Question 9.2

Answer part b.

Answer correctly for a Like!

Current Attempt in Progress 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 $10 from an outside vendor, Division A needs 10,500 lamps for the coming year. Division B has the capacity to manufacture 48,800 lamps annually. Sales to outside customers are estimated at 38,300 lamps for the next year. Reading lamps are sold at $12 each. Variable costs are $7 per lamp and include $1 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 $87,800 Consider the following independent situations. (a) Your answer is correct What should be the minimum transfer price accepted by Division B for the 10,500 lamps and the maximum transfer price paid by Division A? Minimum transfer price accepted by Division B $ per unit Maximum transfer price paid by Division A $ 10 per unit (b) Suppose Division B could use the excess capacity to produce and sell externally 14,000 units of a new product at a price of $8 per unit. The variable cost for this new product is $5 per unit. What should be the minimum transfer price accepted by Division B for the 10,500 lamps and the maximum transfer price paid by Division A? Minimum transfer price accepted by Division B $ per unit Maximum transfer price paid by Division A $ per unit