Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Rapid Industries has multiple divisions. One division, Iron Products, makes a component that another division, Austin, is currently purchasing the open market, Iron products currently
Rapid Industries has multiple divisions. One division, Iron Products, makes a component that another division, Austin, is currently purchasing the open market, Iron products currently has a capacity to produce 505,000 components at the variable cost of $6.50 and a full cost of $9.00. Iron Products has outside sale of 451,000 components at a price of $13.50 per unit. Austin currently purchases 60,000 units from an outside supplier at a price of $11.50 per unit. Assume that Austin desires to use single supplier for his component. a. What will be the effect on Rapid Industries operating profit if the transfer is made internally? Assume the 60,000 units Austin needs are either purchased 100% internally or 100% externally. b. What is the minimum transfer price? (Round your answer to 2 decimal places.) c. What is the maximum transfer price? (Round your answer to 2 decimal places.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started