The Assembly Division of Waltz Company produces components that the Finishing Division incorporates into a final product. Components from the Assembly Division also can be sold to outsiders. Each division has been established as a separate profit center. Data gathered from both divisions’ records reveal the following:

Required:

a. Under what conditions should transfers be made to the Finishing Division? Support your answer with a quantitative analysis.

b. Assuming the conditions exist that you suggested in Requirement

a, at what price do you think transfers should be made?

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Market price-final product $350 Market price-Assembly Division components Assembly Division-variable cost 200 150 Finishing Division-variable completion cost 175