Rose Corporation manufactures state-of-the-art DVD players. It is a division of Sany TV, which manufactures televisions. Rose sells the DVD players to Sany, as well

Question

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Rose Corporation manufactures state-of-the-art DVD players. It is a division of Sany TV, which manufactures televisions. Rose sells the DVD players to Sany, as well as to retail stores. The following information is available for Rose's DVD player: variable cost per unit $150; fixed costs per unit $75; and a selling price of $400 to outside customers. Sany currently purchases DVD players from an outside supplier for $390 each. Top management of Sany would like Rose to provide 20,000 DVD players per year at a transfer price of $150 each.

Instructions

Calculate the minimum transfer price that Rose should accept under each of the following assumptions:

1. a)Rose is operating at full capacity.
2. b)Rose has sufficient excess capacity to provide the 20,000 players to Sany.