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Materials used by Xenia Company in producing Division A's product are currently purchased from outside suppliers at a cost of $31 per unit. The same
Materials used by Xenia Company in producing Division A's product are currently purchased from outside suppliers at a cost of $31 per unit. The same materials are available from Xenia's Division B. Division B has unused capacity and can produce the materials needed by Division A at a variable cost of $23 per unit.
(a) | If a transfer price of $24 per unit is established and 60,000 units of material are transferred, with no reductions in Division 2's current sales, how much would Xenia Company's total income from operations increase? (show your work) |
(b) | If the negotiated price approach is used, what would be the range of acceptable transfer prices? |
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