Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Crede Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading lamp

Crede Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $11 from an outside vendor. Division A needs 9,500 lamps for the coming year. Division B has the capacity to manufacture 48,100 lamps annually. Sales to outside customers are estimated at 38,600 lamps for the next year. Reading lamps are sold at $12 each. Variable costs are $8 per lamp and include $1 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $85,200. Consider the following independent situations.

Suppose Division B could use the excess capacity to produce and sell externally 14,250 units of a new product at a price of $7 per unit. The variable cost for this new product is $5 per unit. What should be the minimum transfer price accepted by Division B for the 9,500 lamps and the maximum transfer price paid by Division A?

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

More Books

Students also viewed these Accounting questions

Question

3. Identify and apply different sampling designs.

Answered: 1 week ago