Current Attempt in Progress

Gary has been managing the cardboard box division of a large food manufacturer for over a year. His division receives the packaging

specifications from the different food areas $($e$.$g$.,$ cereal, crackers, and pasta$)$ and makes the box sizes to order.

The cracker division is quite consistent in the sizes requested, so Gary has clear cost information, as follows, for an average box.

Gary's division is effective at box$-$making and can sell boxes externally to other producers of small food products at a price of $$300$ for

$2,000$ cracker boxes. His division can meet all external demand for cracker boxes and still provide enough boxes to sell internally for an

agreed$-$upon transfer price of $$0\mathrm{.}11$ each.

Just before the company's budgeting process for next year, Gary received an unexpected offer: a different cardboard supplier offered

to sell him $2,000$ cardboard boxes for $$230$ as a trial offer. This price was offered specifically to Gary and was not made public; no

other market participant, including the cracker division manager, was aware of this opportunity. If Gary accepts this offer, his division's

fixed$-$MOH cost will not change. If Gary purchases these boxes, however, and if he is pleased with them, the supplier hinted that the

arrangement could possibly be expanded to cover all of his cracker box needs.

$($a$)$

What type of responsibility center is Gary's division, according to the information provided?

Given the transfer price agreement currently in place, how did the two parties likely settle on that price? $($Round answers to $4$

decimal places, e$..15\mathrm{.}2536.)$

Minumum transfer price $

Maximum transfer price $

eTextbook and Media