Problem 11-23 (Algo) Market-Based Transfer Price (LO11-3] Stavos Company's Screen Division manufactures a standard screen for high-definition televisions (HDTVs). The cost per screen is: Variable cost per screen Fixed cost per screen Total cost per screen $ 122 26* $ 148 *Based on a capacity of 760,000 screens per year. Part of the Screen Division's output is sold to outside manufacturers of HDTVs and part is sold to Stavos Company's Quark Division, which produces an HDTV under its own name. The Screen Division charges $185 per screen for all sales. The net operating income associated with the Quark Division's HDTV is computed as follows: Selling price per unit $ 580 Variable cost per unit: Cost of the screen $185 Variable cost of electronic parts 234 Total variable cost 419 Contribution margin 161 Fixed costs per unit 89* Net operating income per unit $ 72 *Based on a capacity of 240,000 units per year. The Quark Division has an order from an overseas source for 4,500 HDTVs. The overseas source wants to pay only $396 per unit. Required: 1. Assume the Quark Division has enough idle capacity to fill the 4,500-unit order. Is the division likely to accept the $396 price or to reject it? 2. Assume both the Screen Division and the Quark Division have idle capacity. Under these conditions, what is the financial advantage (disadvantage) for the company as a whole (on a per unit basis) if the Quark Division rejects the $396 price? 3. Assume the Quark Division has idle capacity but that the Screen Division is operating at capacity and could sell all of its screens to outside manufacturers. Under these conditions, what is the financial advantage (disadvantage) for the company as a whole (on a per unit basis) if the Quark Division accepts the $396 unit price? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Assume the Quark Division has enough idle capacity to fill the 4,500-unit order. Is the division likely to accept the $396 price or to reject it? Reject O Accept Required 1 Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Assume both the Screen Division and the Quark Division have idle capacity. Under these conditions, what is the financial advantage (disadvantage) for the company as a whole (on a per unit basis) if the Quark Division rejects the $396 price? (Any "Financial Disadvantage" amounts should be entered as a negative.) Financial advantage (disadvantage) on a per unit basis Required 1 Required 3 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Assume the Quark Division has idle capacity but that the Screen Division is operating at capacity and could sell all of its screens to outside manufacturers. Under these conditions, what is the financial advantage (disadvantage) for the company as a whole (on a per unit basis) if the Quark Division accepts the $396 unit price? (Any "Financial Disadvantage" amounts should be entered as a negative.) Show less Financial advantage (disadvantage) on a per unit basis
