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Calgary has two divisions: one that handles the raw materials in the production process, and one that handles the final product finishes. handles the finishing
Calgary has two divisions: one that handles the raw materials in the production process, and one that handles the final product finishes. handles the finishing of the final product. The variable costs in each division are: Raw material handling: $125 per 100 feet of material. Finishing: $145 per 100 feet of finished product. Assume that there is no spoilage or loss of material in the process. In addition, the production can be sold at the raw material handling stage at $175 per 100 feet of material, and the finishing stage at $345 per 100 feet of material, and at the finishing stage at $345 per 100 of finished product. 1- Show whether it is appropriate for Calgary to continue to handle, as a company, both divisions, and both stages in the process both stages in the process. 2- Presume that internal transfers between the handling and completions divisions are made at 130% of variable cost. Show whether each division is maximizing its operating income under this option, and whether under this option, and if there is goal congruence. Explain. 3- Assume that internal transfers between the handling division and the terminations division are made at market price. are made at market price. Show if each division is maximizing its operating income under this option, and if under this option, and if there is goal congruence. Explain
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