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Megatron Inc. has two divisions: a laptops division that manufactures gaming laptops and an electronics division that produces two types of graphic cards - Sapphire
Megatron Inc. has two divisions: a laptops division that manufactures gaming laptops and an electronics division that produces two types of graphic cards - Sapphire and Force. The Sapphire graphic cards can be used in the gaming laptops produced by the laptops division as well as sold externally whereas the Force graphic cards are sold exclusively on the external market. Following is data on the price, costs and hours required for each graphics card: Sapphire Force Selling Price per card $400 $150 Variable Cost per card 100 60 Hours/card 0.6 0.2 The electronics division has a production capacity of 27,000 hours. The external market demand for Sapphire cards is 25,000 and the external market demand for Force cards is 45,000. a) Determine the transfer pricing schedule for the internal transfer of Sapphire cards that conforms to the optimal transfer pricing rule (3 points) b) Determine the total charge for internally shipping 25,000 Sapphire cards (2 points)
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