Division A makes a part with the following characteristics:

production capacity in units..................15,000 units

selling price to outside customers..........$25

variable cost per unit..............................$18

Total fixed costs......................................$60,000

Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A.Division A is currently selling 10,000 units to its outside customers.What should be the lowest acceptable transfer price from the perspective of Division A?

ENTER YOUR ANSWER WITHOUT DOLLAR SIGNS OR OTHER DISCRIPTIONS

Response Feedback:Transfer price>Variable cost + Opportunity costHere you have excess capacity.

Refer back to your answer in the last problem. Division B is now purchasing these parts from an outside supplier at a price of $24 each. If Division B begins to purchase the 5,000 parts from Division A rather than the outside supplier, what is the company as a whole change in net income?

ENTER YOUR ANSWER WITHOUT DOLLAR SIGNS OR OTHER DISCRIPTIONS

Make sure to enter your answer as a positive number (increase) or a negative number (decrease).

Response Feedback:Would you be spending more or less per unit if you stop paying $24 and start to pay the number from your last answer? Is that higher or lower?Multiply your answer by 5,000 units.

Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A.Division A is currently selling 10,000 units to its outside customers.IF the transfer is made, variable costs will decrease by $2 per unit.What should be the lowest acceptable transfer price from the perspective of Division A?

ENTER YOUR ANSWER WITHOUT DOLLAR SIGNS OR OTHER DISCRIPTIONS

Response Feedback:Transfer price>Variable cost + Opportunity cost

Here you have excesscapacity and avoidable costs

Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A.Division A is currently selling 15,000 units to its outside customers.What should be the lowest acceptable transfer price from the perspective of Division A?

ENTER YOUR ANSWER WITHOUT DOLLAR SIGNS OR OTHER DISCRIPTIONS

Response Feedback:Transfer price>Variable cost + Opportunity cost

Here you have no excesscapacity and no avoidable costs

Refer back to your answer in the last problem. Division B is now purchasing these parts from an outside supplier at a price of $24 each. If Division B begins to purchase the 5,000 parts from Division A rather than the outside supplier, what is the company as a whole change in net income?

ENTER YOUR ANSWER WITHOUT DOLLAR SIGNS OR OTHER DISCRIPTIONS

Make sure to enter your answer as a positive number (increase) or a negative number (decrease).

Response Feedback:Would you be spending more or less per unit if you stop paying $24 and start to pay the number from your last answer? Is that higher or lower?Multiply your answer by 5,000 units.

Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A.Division A is currently selling 15,000 units to its outside customers.IF the transfer is made, variable costs will decrease by $2 per unit.What should be the lowest acceptable transfer price from the perspective of Division A?

ENTER YOUR ANSWER WITHOUT DOLLAR SIGNS OR OTHER DISCRIPTIONS

Response Feedback:Transfer price>Variable cost + Opportunity cost

Here you have no excesscapacity but you do have avoidable costs