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June and Jerry organized their growing business into geographical segments, evaluating each on its operating income and profit margin. The two owners retained control of
June and Jerry organized their growing business into geographical segments, evaluating each on its operating income and profit
margin. The two owners retained control of asset purchases. June and Jerry still intended for their segment managers to work
together, helping each other with capacity needs when required. Such participation was left up to the segment managers, though. All
three segments had the same variable and absorption cost for an average twoway trip, at $ and $ per customer, respectively.
Since the culture in this company was very open, each manager was aware of the other segments' similar cost structures.
The Airport segment's drivers were already prebooked for the upcoming holiday weekend, and there was a steady stream of calls
coming in with more requests for this service. Naturally, the Airport segment manager called on both the Hawthorn and Bolton
segments to ask for help. Hawthorn had some capacity, but Bolton was prebooked with its own repeat customers.
Listed below are the average rates to provide twoway transportation services to one person or two people rate was the same in
each geographic area.
a
If you managed the Hawthorn segment and had some available capacity, how much would you want to charge the Airport segment
for taking on this additional work?
Transfer price $ per trip
Do you believe the Airport manager would agree to it
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