Question
Blue Spruce Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading
Blue Spruce 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 can purchase reading lamps at a cost of $10 from an outside vendor. Division A needs 8,200 lamps for the coming year. Division B has the capacity to manufacture 41,000 lamps annually. Sales to outside customers are estimated at 32,800 lamps for the next year. Reading lamps are sold at $12 each. Variable costs are $7 per lamp and include $1 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $65,600. Consider the following independent situations.
(a)
What should be the minimum transfer price accepted by Division B for the 8,200 lamps and the maximum transfer price paid by Division A?
Minimum transfer price accepted by Division B | $enter a dollar amount per unit per unit | |
---|---|---|
Maximum transfer price paid by Division A | $enter a dollar amount per unit per unit |
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