In fact, Unit B1 found a potential new external customer to whom it would have the opportunity
Question:
In fact, Unit B1 found a potential new external customer to whom it would have the opportunity to sell 500 units of a new part, called P2, at a selling price of 1,220. These sales would be in addition to its current external market sales of 1,800 units of P1.
This new production would not change B1's total fixed costs. The manufacturing time for one unit of P2 would be identical to that of one unit of P1. The variable unit cost of production of P2 would be 550. Also, as with P1 parts, P2 parts would generate a unit variable marketing cost of 20.
Under these conditions, at what transfer price would it be worthwhile for B1 to give up this new opportunity to sell 600 units of P1 to B2? Therefore, which new product launch would you recommend: that of R2 at B2 level (with internal transfer of P1 from B1 to B2) or that of P2 at B1 level?
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr