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David Inc. is an electronic manufacturing plant which has three divisions as follows: Division 1, Division 2, Division 3. Division l's products can be transferred
David Inc. is an electronic manufacturing plant which has three divisions as follows: Division 1, Division 2, Division 3. Division l's products can be transferred to Division 2 for further processing or can be sold externally. Division 2's products can be transferred to Division 3 for further processing or can be sold externally. Data regarding all three divisions for the last month are presented as follows: Division 1 Division 2 Division 3 Capacity per month (units) 3,000 4,000 4,500 Selling price per unit $100 $200 $250 Variable cost per unit $60 $90 $125 Fixed costs for the month for the division ($) $84,000 $368,000 $450,000 | Total demand per month for the divisions (units) 3,000 3200 3600 Required a. Calculate the minimum transfer prices for Divisions 1 and 2 based on current demand and current capacity for each division. b. Calculate the minimum special price per unit that would be charged by each of the three divisions for a special order of 100 units of their products. c. Calculate the minimum special price per unit that would be charged by each of the three divisions for a special order of 1,000 units of their products. d. What would be the maximum price per unit that David Inc would pay to outsource (buy) 3,000 units of Division 1 products from an outside supplier? Assume fixed costs remain unchanged and that the products would be sold to its current customers
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