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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 $10.11 from an outside vendor. Division A needs 11,100 lamps for the coming year. Division B has the capacity to manufacture 49,900 lamps annually. Sales to outside customers are estimated at 38,800 lamps for the next year. Reading lamps are sold at $12.37 each. Variable costs are $6.93 per lamp and include $1.30 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 $82,100. Consider the following independent situations. What should be the minimum transfer price accepted by Division B for the 11,100 lamps and the maximum transfer price paid by Division A? (Round answers to 2 decimal places, e.g. 15.25.) Suppose Division B could use the excess capacity to produce and sell externally 20,000 units of a new product at a price of $7.96 per unit. The variable cost for this new product is $6.49 per unit. What should be the minimum transfer price accepted by Division B for the 11,100 lamps and the maximum transfer price paid by Division A? (Round answers to 2 decimal places, e.g. 15.25.) If Division A needs 15,300 lamps instead of 11,100 during the next year, what should be the minimum transfer price accepted by Division B and the maximum transfer price paid by Division A? (Round answers to 2 decimal places, e.g. 15.25.)
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