Exercise 22-16 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 $ 10.4? from an outside vendor. Division A needs 12,000 lamps for the coming veer. Division B has the capacitv to manufacture 50,900 lamps annuallv. Sales to outside customers are estimated at 33,900 lamps for the next vear. Reading lamps are sold at $ 11.96 each. 1|v'ariahle costs are $ 6.?3 per lamp and inciude $ 1.33 of variable sales costs that are not incurred if lamps are sold internallv to Division A. The total amount of fixed costs for Division B is $ B4,?00 . Consider the following independent situations. 1ll'v'hat should be the minimum transfer price accepted tiv Division B for the 12,000 lamps and the maximum transfer price paid tiv Division A? {Round answers to 2 decimai places, e.g. 10.50.) Minimum transfer price accepted oi- Division E $ . per unit Maximum transfer price paid try Division a. $ . _ per unlr Suppose Division B could use the excess capacitv to produce and sell externallv 20,400 units of a new product at a price of :1; ?.9E- per unit. The variable cost for this new product is $ 6.33 per unit. What should he the minimum transfer price accepted bv Division E for the 12,000 lamps and the maximum transfer price paid hv Division A? ( Round answers to 2 decimal pieces, e._gr. 10.50.) Minimum was we mm a are" E $ l: per u... Maximum transfer price Paid lav Divlslon A 5 per unit If Division A needs 15,900 lamps instead of 12,000 during the next vear, what should be the minimum transfer price accepted hv Division B and the maximum transfer price paid bv Division A? {Round answers to 2 decimalI pieces, e.g. 10.50.) l-linlmurn transfer price accepted lav Division E $ :] per unit Maximum transfer price paid try Divlslon A $ :] Per unit Exercise 22-1? Twyla Company is a multidivisional company. Its managers have full responsibility for prots and complete autonomy to accept or reject transfers from other divisions. Division A produces a subassembly part for which there is a competitive market. Division B currently uses this subassernbly for a nal product that is sold outside at $2,400. Division A charges Division B market price for the part, which is $1,540 per unit. Variable costs are $1,090 and $1,170.] for Divisions A and B, respectively. The manager of Division B feels that Division A should transfer the part at a lower price than market because at market, Division B is unable to make a prot. (a) Calculate Division as contribution margin if transfers are made at the market price, and calculate the company's total contribution margin. {Enter negative amounts use either a negative sign preceding the number eg -45 or parentheses eg (45).) eeeee ee .4: Companfstotal contribution margin 5\" I ('1) Assume that Division A can sell all its production in the open market. Should Division A transfer the goods to Division B? C! (:1 Assume that Division A can sell in the open market only 460 units at $1,540 per unit out of the 920 units that it can produce every month. Assume also that a 10% reduction in price is necessary to sell all 920 units each month. Compute the contribution margins under following three different alternatives to support your decision. [Round answers to the nearest wnoie dollar, e.g. 5,2?5.) Alternatlve 1: Halntaln price. no transfers 57 :] Alternatlve 2: Cut price, no transfers $ :] Alternatlva 3: Maintain pride and transfers $ :]
