Question
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 from an outside vendor. Division A needs 10,300 lamps for the coming year. Division B has the capacity to manufacture 48,100 lamps annually. Sales to outside customers are estimated at 37,800 lamps for the next year. Reading lamps are sold at $12 each. Variable costs are $7 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 $84,600. Consider the following independent situations. What should be the minimum transfer price accepted by Division B for the 10,300 lamps and the maximum transfer price paid by Division A?
What is the Minimum transfer price accepted by Division B $ per unit
What is the Maximum transfer price paid by Division A $ per unit
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