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Current Attempt in Progress Crede Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each
Current Attempt in Progress 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 9,400 lamps for the coming year. Division B has the capacity to manufacture 52,100 lamps annually. Sales to outside customers are estimated at 42,700 lamps for the next year. Reading lamps are sold at $12 each. Variable costs are $6 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 $82,800. Consider the following independent situations. What should be the minimum transfer price accepted by Division B for the 9,400 lamps and the maximum transfer price paid by Division A? Minimum transfer price accepted by Division B Maximum transfer price paid by Division A eTextbook and Media LA $ LA per unit $ per unit Suppose Division B could use the excess capacity to produce and sell externally 14,100 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 9,400 lamps and the maximum transfer price paid by Division A? Minimum transfer price accepted by Division B $ Maximum transfer price paid by Division A per unit per unit
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