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Collyer Products Inc. has a Valve Division that manufactures and sells a standard valve as follows: Capacity in units Selling price to outside customers on
Collyer Products Inc. has a Valve Division that manufactures and sells a standard valve as follows: Capacity in units Selling price to outside customers on the intercediate sarket Variable costs per unit Fixed costs per unit (based on capacity) 170,000 21 $ $ 10 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 17000 valves per year from an overseas supplier at a cost of $20 per valve. Required: 1. Assume that the Valve Division has ample Idle capacity to handle all of the Pump Division's needs. What is the acceptable range, i any, for the transfer price between the two divisions? Trance pro 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? 10 po Per 3. Assume again that the Valve Division is selling all that it can produce to outside customers on the intermediate market. Also assume that $3 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? Transfer price
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