Question
10a. Your Division has the capacity for making 95,000 wheels per year and sells 60,000 each year on the outside market. The regular sales price
10a. Your Division has the capacity for making 95,000 wheels per year and sells 60,000 each year on the outside market. The regular sales price is $100 per wheel set, and the variable production cost per unit is $65. Other Division currently buys 30,000 of the same wheels from an outside supplier at a price of $90 per wheel. What is the change in net income if Other Division buys the 30,000 wheels from Your Division $87 per wheel set?
10b. The Post Division produces basic posts which can be sold to outside customers or sold to the Lamp Division. Last year the Lamp Division bought all of its 25,000 posts from Post at $1.50 each. If Post transfers 25,000 posts to the Lamp Division, it will have to reduce sales to outside customers by 15,000 units, but variable costs will be reduced by $0.05 per unit. The following data are available for last year's activities of the Post Division:
Capacity | 300,000 | units |
Selling price on outside sales | $1.75 | per unit |
Variable cost on outside sales | $0.90 | per unit |
Total fixed cost | $150,000 | total |
What is the lowest transfer price that would not reduce the profits of the Post Division?
2part please solve will like and comment.
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