Question
Ampro Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading lamp
Ampro Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading lamp as one of its components. Division A needs 11,600 lamps for the coming year and can purchase reading lamps at a cost of $10 from an outside vendor. Division B has the capacity to manufacture 54,800 lamps annually. Sales to outside customers are estimated at 43,200 lamps for the next year. It sells reading lamps for $13 each. Variable costs are $7 per lamp and include $2 of variable sales costs that are not incurred if division B sells lamps internally to division A. The total amount of fixed costs for division B is $80,000. Consider the following independent situations:
Ampro Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading lamp as one of its components. Division A needs 11,600 lamps for the coming year and can purchase reading lamps at a cost of $10 from an outside vendor. Division B has the capacity to manufacture 54,800 lamps annually. Sales to outside customers are estimated at 43,200 lamps for the next year. It sells reading lamps for $13 each. Variable costs are $7 per lamp and include $2 of variable sales costs that are not incurred if division B sells lamps internally to division A. The total amount of fixed costs for division B is $80,000. Consider the following independent situations: What should be the minimum transfer price division B accepts for the 11,600 lamps and the maximum transfer price division A pays? $ Minimum transfer price per unit $ per unit Maximum transfer price Suppose division B could use the excess capacity to produce and sell externally 23,200 units of a new product at a price of $7 per unit. The variable cost for this new product is $4 per unit. What should be the minimum transfer price division B accepts for the 11,600 lamps and the maximum transfer price division A pays? $ Minimum transfer price per unit $ Maximum transfer price per unit If division A needs 17,400 lamps instead of 11,600 during the next year, what should be the minimum transfer price division B accepts and the maximum transfer price division A pays? (Round minimum transfer price to 2 decimal places, e.g. 15.25.) $ Minimum transfer price per unit $ Maximum transfer price per unitStep by Step Solution
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