Hrubec Products, Inc, operates a Pulp Division that manufactures wood pulp for use in the production of various paper goods. Revenue and costs associated with a ton of pulp follow $24 $15 Selling price Expenses: Variable Fixed (based on a capacity of 102,000 tons per year) Net operating income 6 21 $3 Hrubec Products has just acquired a small company that manufactures paper cartons. Hrubec plans to treat its newly acquired Carton Division as a profit center . The manager of the Carton Division is currently purchasing 30,000 tons of pulp per year from a supplier at a cost of $21.60 per ton Hrubec's president is anxious for the Carton Division to begin purchasing its pulp from the Pulp Division of the managers of the two divisions can negotiate an acceptable transfer price Required: For (1) and (2) below, assume the Pulp Division can sell all of its pulp to outside customers for $24 per ton 1. What is the Pulp Division's lowest acceptable transfer price? What is the Carton Division's highest acceptable transfer price? What is the range of acceptable transfer prices (if any) between the two divisions? Are the managers of the Carton and Pulp Divisions likely to voluntarily agree to a transfer price for 30,000 tons of pulp next year? 2. If the Pulp Division meets the price that the Carton Division is currently paying to its supplier and sells 30.000 tons of pulp to the Carton Division each year, what will be the effect on the profits of the Puip Division, the Carton Division, and the company as a whole? For (3)(6) below, assume that the Pulp Division is currently selling only 62,000 tons of pulp each year to outside customers at the stated $24 price 3. What is the Pulp Division's lowest acceptable transfer price? What is the Carton Division's highest acceptable transfer price? What is the range of acceptable transfer prices (if any) between the two divisions? Are the managers of the Carton and Pulp Divisions likely to voluntarily agree to a transfer price for 30,000 tons of pulp next year? 4-a Suppose the Carton Division's outside supplier drops its price to only $20 per ton Should the Pulp Division meet this price? 4-6. If the Pulp Division does not meet the $20 price, what will be the effect on the profits of the company as a whole? 5. Refer to (4) above. If the Pulp Division refuses to meet the $20 price should the Carton Division be required to purchase from the Pulp Division at a higher price for the good of the company as a whole? 6. Refer to (4) above. Assume that due to inflexible management policies, the Carton Division is required to purchase 30,000 tons of pulp each year from the Pulp Division at $24 per ton What will be the effect on the profits of the company as a whole? Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 48 Reg 5 Reg 6 Req 4A Reg 2 Req 1 Reg 3 What is the Pulp Division's lowest acceptable transfer price? What is the Carton Division's highest acceptat price? What is the range of acceptable transfer prices (if any) between the two divisions? Are the manager and Pulp Divisions likely to voluntarily agree to a transfer price for 30,000 tons of pulp next year? (Round transfer price answer to 1 decimal place.) Identify the range of acceptable transfer prices (if any) There is not a range of acceptable transfer prices There is a range of acceptable transfer prices as shown below $ 22 2 Transfer price 2 $ 24% Are the managers likely to voluntarily agree to a transfer price for 30,000 tons of pulp next year? OYes No Req 2 > 3 Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Req 4A Reg 48 Reg 5 Reg 6 What is the Pulp Division's lowest acceptable transfer price? What is the Carton Division's highest acceptable transfer price? What is the range of acceptable transfer prices (if any) between the two divisions? Are the managers of the Carton and Pulp Divisions likely to voluntarily agree to a transfer price for 30,000 tons of pulp next year? (Round your answers to nearest whole dollar amount.) Show less Identify the lowest and highest acceptable transfer prices Lowest acceptable transfer price $ 15 Highest acceptable transfer price $ 21.60 Identify the range of acceptable transfer prices (if any) There is not a range of acceptable transfer prices There is a range of acceptable transfer prices as shown below $ 220 Transfer price 5 15.00 3 Are the managers wely to voluntarily agree to a transfer price for 30.000 tons of pulp ned year? Yes Na ME Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4A Req 48 Reg 5 Reg 6 if the Pulp Division does not meet the $20 price, what will be the effect on the profits of the company as a whole? Profit of the company will decrease by $ 116,000 Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Reg 4B Reqs Reg 6 Refer to (1). Assume that due to inflexible management policies, the carton Division is required to purchase 30,000 tons of pulp each year from the Pulp Division at $24 per ton. What will be the effect on the profits of the company as a whole? The company as a whole will have alm) increase in prolit by $ 145,000
