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Blossom Industries is a decentralized firm. It has two production centres: Vancouver and Kamloops. Each one is evaluated based on its return on investment. Vancouver
Blossom Industries is a decentralized firm. It has two production centres: Vancouver and Kamloops. Each one is evaluated based on its return on investment. Vancouver has the capacity to manufacture 110,000 units of component TR222. Vancouver's variable costs are $151 per unit. Kamloops uses component TR222 in one of its products. Kamloops adds $91 of variable costs to the component and sells the final product for $455. Consider the following independent situations: Vancouver can sell all 110,000 units of TR222 on the open market at a price of $250 per unit. Kamloops is willing to buy 11,000 of those units. What should the transfer price be? Of the 110,000 units of component TR222 it can produce, Vancouver can sell 77,000 units on the open market at a price of $250 per unit. Kamloops is willing to buy an additional 11,000 units. What should the minimum transfer price be? Of the 110,000 units of component TR222 it can produce, Vancouver can sell 88,000 units on the open market at a price of $250 per unit. Kamloops is willing to buy an additional 33,000 units. What should the transfer price be? (Round answer to 2 decimal places, e.g. 52.75.)
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