Item$2$

$5$

points

eBookHintPrintReferencesCheck my workCheck My Work button is now enabled$2$Item $2$

Sako Company$$s Audio Division produces a speaker used by manufacturers of various audio products. Sales and cost data on the speaker follow:

Selling price per unit on the intermediate market $ $76$

Variable costs per unit $ $58$

Fixed costs per unit $($based on capacity$)$ $ $8$

Capacity in units $25,000$

Sako Company has a Hi$-$Fi Division that could use this speaker in one of its products. The Hi$-$Fi Division will need $5,000$ speakers per year. It has received a quote of $$73$ per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits.

Required:

Assume the Audio Division sells only $20,000$ speakers per year to outside customers.

From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi$-$Fi Division?

From the standpoint of the Hi$-$Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

What is the range of acceptable transfer prices $($if any$)$ between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of $5,000$ speakers from the Audio Division to the Hi$-$Fi Division?

From the standpoint of the entire company, should the transfer take place?

Assume the Audio Division is selling $22,500$ speakers per year to outside customers.

From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi$-$Fi Division?

From the standpoint of the Hi$-$Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

What is the range of acceptable transfer prices $($if any$)$ between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of $5,000$ speakers from the Audio Division to the Hi$-$Fi Division?

From the standpoint of the entire company, should the transfer take place?

Assume the Audio Division is selling $25,000$ speakers per year to outside customers.

From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi$-$Fi Division?

From the standpoint of the Hi$-$Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

What is the range of acceptable transfer prices $($if any$)$ between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of $5,000$ speakers from the Audio Division to the Hi$-$Fi Division?

From the standpoint of the entire company, should the transfer take place?