Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Collyer Products Inc. has a Valve Division that manufactures and sells a standard valve as follows: Capacity in units 10,000 Selling price to outside customers

image text in transcribedimage text in transcribed
Collyer Products Inc. has a Valve Division that manufactures and sells a standard valve as follows: Capacity in units 10,000 Selling price to outside customers on the intermediate market is 15 Variable costs per unit is 8 Fixed costs per unit (based on capacity) $ 5 The company has a Pump Division that could use this valve in the manufacture of one of its pumps. The Pump Division is currently purchasing 10,000 valves per year from an overseas supplier at a cost of $14 per valve. Required: 1. Assume that the Valve Division has ample idle capacity to handle all ofthe Pump Division's needs. What is the acceptable range, if any, for the transfer price between the two divisions? m 2. Assume that the Valve Division is selling all that it can produce to outside customers on the intermediate market. What is the acceptable range, if any, for the transfer price between the two divisions? ::| 3. Assume again that the Valve Division is selling all that it can produce to outside customers on the intermediate market. Also assume that $2 in variable expenses can be avoided on transfers within the company, due to reduced selling costs. What is the acceptable range, if any, for the transfer price between the two divisions? m 4. Assume the Pump Division needs 20,000 special high-pressure valves per year. The Valve Division's variable costs to manufacture and ship the special valve would be $10 per unit. To produce these special valves, the Valve Division would have to reduce its production and sales of regular valves from 100,000 units per year to 70,000 units per year. As far as the Valve Division is concerned, what is the lowest acceptable transfer price? (Round your answer to 2 decimal places.) :|

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting, The Financial Chapters

Authors: Tracie Miller Nobles

12th Edition

013449041X, 9780134490410

More Books

Students also viewed these Accounting questions

Question

14. Now reconcile what you answered to problem 15 with problem 13.

Answered: 1 week ago