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Bramble Corporation manufactures car stereos. It is a division of Vaughn Motors, which manufactures vehicles. Bramble sells car stereos to Vaughn , as well as
Bramble Corporation manufactures car stereos. It is a division of Vaughn Motors, which manufactures vehicles. Bramble sells car stereos to Vaughn, as well as to other vehicle manufacturers and retail stores. The following information is available for Bramble's standard unit: variable cost per unit $38, fixed cost per unit $27, and selling price to outside customer $80. Vaughn currently purchases a standard unit from an outside supplier for $75. Because of quality concerns and to ensure a reliable supply, the top management of Vaughn has ordered Bramble to provide 160,000 units per year at a transfer price of $36 per unit. Bramble is already operating at full capacity. Bramble can avoid $2 per unit of variable selling costs by selling the unit internally.
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