Question 1 10 points Mshamaq Co, has Division A that madaches and sells amanber of parts, including Pan XYZ Data concerning Pan XYZ appear below Capacity in suits Selling price to outside customers Variable cost per unit $5,000 5.95 5.55 Fixed cost per unit (based on capacity) $20 The company has Division B that could use Part XYZ in one of its products. Division B is currently purchasing 20,000 of Part XYZ. per year from an overseas supplier at a cost of 99% per part Required: a. Assume that Division A is selling all of Part XYZ it can produce to outside customers. What is the acceptable range, if any, for the transfer price between the two divisions? (4 marks] b. Assume again that Division A is selling all of Part XYZ it can produce to outside customers. Also assume that S4 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What is the acceptable range, if any, for the transfer price between the two divisions? (4 marks) c. Based on requirement (a), assume Division A offers to sell 20.000 units to Division B for $115 and that Division B refuses this price. What will be the loss in potential profits for Division A? [2 marks] For the toolbar, press ALT-F10 (PC) or ALT-FN-F10 (Mac) *** Av I 10pt % B IVS Paragraph Arial 1 5211 3. X X The "Qe BAY # Question 1 10 points Milwaq Ca, las Division A that manufactures and sells amber of parts, including Put XYZ. Data concerning Par XYZ appear below: Capacity in units Selling price to outside customers Variable cost per unit $5,000 $95 $55 Fixed cost per unit (hased on capacity) The company has Division B that could use Part XYZ in one of its products. Division B is currently purchasing 20.000 of Part XYZ per year from an overseas supplier at a cost of pr part. Required: a. Assume that Division A is selling all of Part XYZ it can produce to ounide customers. What is the acceptable range, if any, for the transfer price between the two divisions? (4 marks] b. Asstane again that Division A is selling all of Pan XYZ it can produce to outside customers. Also assume that 54 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What is the acceptable range, if any, for the transfer price between the two divisions? (4 marks] c. Based on requirement (a), assume Division A offers to sell 20.000 units to Division B for $115 and that Devision B refuses this price. What will be the loss in potential profits for Division A [2 marks] For the toolbar, press ALT+F10 (PC) or ALT-FN-F10 (Mac *** Ev AV I. XO BIUS Paragraph V Arial 10pt 199 6 X X E B
