The Lighting division of St. Johns Office Furniture needs 1,200 units of a leaded-glass lamp shade from

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The Lighting division of St. John’s Office Furniture needs 1,200 units of a leaded-glass lamp shade from the Fabricating division. The company has a policy of negotiated transfer prices. The Fabricating division has enough excess capacity to produce 2,000 units of the lamp shade. Its variable cost of production is $23. The market price of the lamp shade to external customers is $39. What is the natural bargaining range for a transfer price between the two divisions? Explain why no price below your range would be acceptable. Also explain why no price above your range would be acceptable.

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Management Accounting

ISBN: 978-0132570848

6th Canadian edition

Authors: Charles T. Horngren, Gary L. Sundem, William O. Stratton, Phillip Beaulieu

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