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 $ 9.70 from an outside vendor. Division A needs 10,600 lamps for the coming year. Division B has the capacity to manufacture 50,000 lamps annually. Sales to outside customers are estimated at 39,400 lamps for the next year. Reading lamps are sold at $ 11.77 each. Variable costs are $ 7.32 per lamp and include $ 1.28 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 $ 77,300 . Consider the following independent situations.
If Division A needs 14,400 lamps instead of 10,600 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. 10.50.)
Minimum transfer price accepted by Division B:$__ per unit
Maximum transfer price paid by Division A $__ per unit
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