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A jewelry company has several business units, including its Silver Processing unit and its Earrings unit. The Silver Processing unit typically sells all of its
A jewelry company has several business units, including its Silver Processing unit and its Earrings unit. The Silver Processing unit typically sells all of its silver to external companies unless an internal division or business unit decides to use it as its supplier. The Earrings unit has decided to add a line of silver hoops to the line of gold hoops it has been selling for several years. Prior to this request, the Silver Processing unit reported the following amounts for the year: Sales (14600 ounces of silver) Variable Expenses Contribution Margin Fixed Expenses Operating Income $319900 182792 $137108 84900 $52208 The Silver Processing unit has a capacity of 15200 ounces of silver, and the Earrings unit has expressed an interest in purchasing the remaining ounces in Silver's processing capacity. What is the minimum acceptable transfer price per ounce of silver if the Earrings division purchases them?
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