Question
6 (4 Marks) The Batool Division of Alisha Company makes fidget spinners which can either be sold to outside customers or transferred to the Hamza
6 (4 Marks) The Batool Division of Alisha Company makes fidget spinners which can either be sold to outside customers or transferred to the Hamza Division of Alisha Company. Last month the Hamza Division bought all 4,000 of its fidget spinners from the Batool Division for Rs.42 each. The following data are available from last month's operations for the Batool Division: Capacity Selling price per fidget spinner to outside customers Variable cost per fidget spinner when sold to outside customers 12,000 fidget spinners Rs.45 Rs.39 If the Batool Division sells fidget spinners to the Hamza Division, Batool can avoid Rs.2 per fidget spinner in sales commissions. An outside supplier has offered to supply fidget spinners to the Hamza Division for Rs. 41 each. (a) Assume that the Batool Division has ample idle capacity to meet the demand of the Hamza Division. What should be the lowest acceptable transfer price from the perspective of the Batool Division? (b) Assume that Batool can sell 9,000 fidget spinners each month to outside consumers, what should be the lowest acceptable transfer price from the perspective of the Batool Division in this situation
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started