* Cut in overline 3 CUCK HERE TO SAVE YOUR WORK E 2 Nelco Company's Electrical Division produces a high-quality transformer. Sales and cost data on the trendom $80 $50 $12 75,000 Selling price per unit on the outside market Variable costs per unit Fixed costs per unit (based on capacity) Capacity in units 3 5 6 7 8 Nelco Company has a Motor Division that would like to begin purchasing this transformer from the Electrical Dersion. The Wed currently purchasing 20,000 transformers each year from another company at a cost of $78 per transformer. The suppliers the Divsion a 10% discount. 9 10 Required: 11 12 1. Assume that the Electrical Division is now selling 75,000 transformers each year to outside customers. Will a transfer take place? 13 14 a) Calculate the miniumum and maximum transfer prices. (3 marks) 15 from the perspective of the 16 Minimum transfer price from the perspective of the 18 Maximum transfer price New. > TP V4 answer sheet 17 19 Font Name - * Cut B C Copy CK HERE TO SAVE YOUR WORX 2. Now assume that the Electrical Division is currently selling 62,000 transformers to outside customers and there savings on internal sales. Supporting calcuations 5 a) Calculate the minimum and maximum transfer prices. (3 marks) 6 7 -8 Minimum transfer price 30 Maximum transfer price 31 32 33 34 35 36 37 38 39 40 b) Are the managers of the two divisions likely to voluntarily agree to a transfer price for 20,000 transformers each year? Transfer: Thor 19 DAN 2 New 7 & 41 ? to R TN 74 answer sheet