Comm Devices (CD) is a division of Worldwide Communications, Inc CD produces restaurant pagers and other personal communication devices. These devices are sold to other Worldwide divisions, as well as to other communication companies. CD was recently approached by the manager of the Personal Communications Division regarding a request to make a special emergency-response pager designed to receive signals from anywhere in the world. The Personal Communications Division has requested that CD produce 9.900 units of this special pager. The following facts are available regarding the Comm Devices Division $97 Selling price of standard pager Variable cost of standard pager Additional variable cost of special pager $49 $36 For each of the following independent situations, calculate the minimum transfer price, and determine whether the Personal Communications Division should accept or reject the offer. (a) The Personal Communications Division has offered to pay the CD Division $112 per pager. The CD Division has no available capacity. The CD Division would have to forgo sales of 7.920 pagers to existing customers in order to meet the request of the Personal Communications Division (Note: The number of special pagers to be produced does not equal the number of existing pagers that would be forgone.) (Round answer to 2 decimal places, eg. 125.36.) Minimum transfer price $ Personal Communications Division should the offer. (b) The Personal Communications Division has offered to pay the CD Division $150 per pager. The CD Division has no available capacity. The CD Division would have to forgo sales of 13,200 pagers to existing customers in order to meet the request of the Personal Communications Division. (Note: The number of special pagers to be produced does not equal the number of existing pagers that would be forgone.) Minimum transfer prices Personal Communications Division should the offer. The Personal Communications Division has offered to pay the CD Division $107 per pager. The CD Division has available capacity Minimum transfer price $ Personal Communications Division should the offer Leno Company makes swimsuits and sells these suits directly to retailers. Although Leno has a variety of suits, it does not make the All-Body suit used by highly skilled swimmers. The market research department believes that a strong market exists for this type of suit. The department indicates that the All-Body suit would sell for approximately $100. Given its experience, Leno believes the All-Body suit would have the following manufacturing costs. $29 Direct materials Direct labor Manufacturing overhead 27 44 Total costs $100 (21) Assume that Leno uses cost-plus pricing setting the selling price 22% above its costs. What would be the price charged for the All-Body swimsuit? Selling price $ $
