Barrhaven-brew, a local Ottawa micro-brewery, recently merged with a bottle making plant in New York to complement its Barrhaven brewing facilities. Barrhaven-brew has two divisions: Bottle Making and Brewing. Each division is evaluated as a profit centre. Bottle Making Division The bottle making division makes cases of empty bottles and sells them on both the open market and to the brewing division. Other information is as follows: Capacity 340,000 cases Current Production 320,000 cases Market selling price $6.00 per case Variable costs $4.00 per case (based on current production) Fixed costs $1.80 per case (based on current production) Brewing Division The brewing division brews and bottles beer. It buys empty bottles from both the bottle making division and the open market. Other information is as follows: Capacity 300,000 cases Current Production 260,000 cases Market selling price $40.00 per case Variable cost $28.00 per case (based on current production) Fixed cost $10.00 per case (based on current production) Note: The Variable cost per case includes an estimated cost of $6 per case of bottles Each of these is a separate situation: A. What is the minimum transfer price the bottle making division will sell an additional case of bottles to the brewery division? B. What is the maximum transfer price the brewery division will buy an additional case of bottles from the bottling making division? C. Current production for the Bottle division is based on estimated sales of 320,000 cases (170,000 cases on the open market and 150,000 cases to the brewery division). The brewery division would like to purchase an additional 30,000 cases from the bottle division. The special order does not requiring packaging - this will reduce the cost for the Bottling division by $0.05 per case. What is the minimum transfer prices per case the bottle making division will sell the additional 30,000 cases to the brewery division? D. Based on the information in part C, what is the maximum price per case that the Brewing division is willing to pay for an additional 30,000 cases. E. What kinds of things would the Bottling Division be responsible for if it was a Cost Centre instead of a profit centre Barrhaven-brew, a local Ottawa micro-brewery, recently merged with a bottle making plant in New York to complement its Barrhaven brewing facilities. Barrhaven-brew has two divisions: Bottle Making and Brewing. Each division is evaluated as a profit centre. Bottle Making Division The bottle making division makes cases of empty bottles and sells them on both the open market and to the brewing division. Other information is as follows: Capacity 340,000 cases Current Production 320,000 cases Market selling price $6.00 per case Variable costs $4.00 per case (based on current production) Fixed costs $1.80 per case (based on current production) Brewing Division The brewing division brews and bottles beer. It buys empty bottles from both the bottle making division and the open market. Other information is as follows: Capacity 300,000 cases Current Production 260,000 cases Market selling price $40.00 per case Variable cost $28.00 per case (based on current production) Fixed cost $10.00 per case (based on current production) Note: The Variable cost per case includes an estimated cost of $6 per case of bottles Each of these is a separate situation: A. What is the minimum transfer price the bottle making division will sell an additional case of bottles to the brewery division? B. What is the maximum transfer price the brewery division will buy an additional case of bottles from the bottling making division? C. Current production for the Bottle division is based on estimated sales of 320,000 cases (170,000 cases on the open market and 150,000 cases to the brewery division). The brewery division would like to purchase an additional 30,000 cases from the bottle division. The special order does not requiring packaging - this will reduce the cost for the Bottling division by $0.05 per case. What is the minimum transfer prices per case the bottle making division will sell the additional 30,000 cases to the brewery division? D. Based on the information in part C, what is the maximum price per case that the Brewing division is willing to pay for an additional 30,000 cases. E. What kinds of things would the Bottling Division be responsible for if it was a Cost Centre instead of a profit centre
