Question
Grover Corp. is a manufacturing company that produces golf clubs. Birdie is a division of Grover that manufactures putters. Birdies putters are used in Grovers
Grover Corp. is a manufacturing company that produces golf clubs. Birdie is a division of Grover that manufactures putters. Birdies putters are used in Grovers golf club sets and are sold to other golf wholesalers. Cost information per putter follows:
Variable cost | $25.00 |
Full cost | 28.00 |
Market price | 42.00 |
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In addition, its capacity data follow:
Capacity per year | 40,000 putters |
Current production level | 30,000 putters |
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Required: 1. Assuming Grover produces 3,000 putters per year, determine the overall benefit of using putters from Birdie instead of purchasing them externally.
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2. Determine the maximum price that the production facility would be willing to pay to purchase the putters from Birdie.
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3. Determine the minimum that Birdie will accept as a transfer price.
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4. Determine the mutually beneficial transfer price for the putters. (Round your answer to 2 decimal places.)
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5. If Birdie were operating at capacity, What would the minimum price it accept?
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