Question
11. Highpoint Company produces coffee tables. Each table requires one set of assembly parts that are produced in Division A. The parts are then transferred
11. Highpoint Company produces coffee tables. Each table requires one set of assembly parts that are produced in Division A. The parts are then transferred to Division B for assembly into tables. The manager of each division is operating with complete autonomy and is being evaluated on the basis of the divisions operating income. Division A has the capacity to produce 5,000 sets of parts a month. The incremental cost for producing one set of the parts for one table in Division A is $120. Division A can sell the parts locally for $200 per set. The incremental cost to assemble a table in Division B is $220. Division B can sell a fully assembled table for $450 each. If Division A is operating at full capacity, what would be the minimum and maximum transfer prices for Division A and Division B respectively, and will the transfer take place? A) $120 minimum and $200 maximum; the transfer will take place. B) $120 minimum and $230 maximum; the transfer will take place. C) $200 minimum and $450 maximum; the transfer will take place. D) $200 minimum and $230 maximum; the transfer will take place.
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