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Gutierrez Company makes various electronic products. The company is divided into a number of autonomous divisions that can either sell to internal units or sell externally. All divisions are located in buildings on the same piece of property. The Board Division has offered the Chip Division $21 per unit to supply it with chips for 42,000 boards. It has been purchasing these chips for $22 per unit from outside suppliers. The Chip Division receives $23.30 per unit for sales made to outside customers on this type of chip. The variable cost of chips sold externally by the Chip Division is $15.30. It estimates that it will save $3.30 per chip of selling expenses on units sold internally to the Board Division. The Chip Division has no excess capacity. (a) Calculate the minimum transfer price that the Chip Division should accept. (Round answers to 2 decimal places. eg. 10.25.) Minimum transfer price $ Should Chip Division accept the offer? (b) Suppose that the Chip Division decides to reject the offer. What are the financial implications for each division, and for the company as a whole of this decision? Total contribution margin by Board Division $ Total contribution margin by Chip Division $ Overall contribution margin for the company $ Comm Devices (CD) is a division of Worldwide Communications, Inc. CD produces restaurant pagers and other personal communication devices. These devices are sold to other Worldwide divisions, as well as to other communication companies. CD was recently approached by the manager of the Personal Communications Division regarding a request to make a special emergency- response pager designed to receive signals from anywhere in the world. The Personal Communications Division has requested that CD produce 11,700 units of this special pager. The following facts are available regarding the Comm Devices Division Selling price of standard pager $93 Variable cost of standard pager Additional variable cost of special pager $40 $45 For each of the following independent situations, calculate the minimum transfer price, and determine whether the Personal Communications Division should accept or reject the offer. (a) The Personal Communications Division has offered to pay the CD Division $108 per pager. The CD Division has no available capacity. The CD Division would have to forgo sales of 9.360 pagers to existing customers in order to meet the request of the Personal Communications Division (Note: The number of special pagers to be produced does not equal the number of existing pagers that would be forgone.) (Round answer to 2 decimal places, eg. 125.36.) Minimum transfer price $ Personal Communications Division should the offer (b) The Personal Communications Division has offered to pay the CD Division $150 per pager. The CD Division has no available capacity The CD Division would have to forgo sales of 15,600 pagers to existing customers in order to meet the request of the Personal Communications Division. (Note: The number of special pagers to be produced does not equal the number of existing pagers that would be forgone.) Minimum transfer price $ Personal Communications Division should the offer. (c) The Personal Communications Division has offered to pay the CD Division $103 per pager. The CD Division has available capacity. Minimum transfer prices Personal Communications Division should the offer
