Sako Companys Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:

Selling price per unit on the intermediate market	$	42
Variable costs per unit	$	19
Fixed costs per unit (based on capacity)	$	9
Capacity in units		63,000

Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 10,000 speakers per year. It has received a quote of $31 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits.

Required:

1. Assume the Audio Division is now selling only 53,000 speakers per year to outside customers.

a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?

b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 10,000 speakers from the Audio Division to the Hi-Fi Division?

d. From the standpoint of the entire company, should the transfer take place?

2. Assume the Audio Division is selling all of the speakers it can produce to outside customers.

a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?

b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 10,000 speakers from the Audio Division to the Hi-Fi Division?

d. From the standpoint of the entire company, should the transfer take place?

answer the questions on the pictures

Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 1C Req 1D Req 2A Req 2B Reg 2C Req 2D From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? Assume the Audio Division is selling all of the speakers it can produce to outside customers. Lowest acceptable transfer price Complete this question by entering your answers in the tabs below. Req 1A Reg 1B Req 1C Req 1D Req 2A Req 2B Req 20 Req 2D From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? Assume the Audio Division is selling all of the speakers it can produce to outside customers. Highest acceptable transfer price Complete this question by entering your answers in the tabs below. Req 1A Req 1B Reg 1C Req 1D Req 2A Req 2B Req 2C Req 2D What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 10,000 speakers from the Audio Division to the Hi-Fi Division? Assume the Audio Division is selling all of the speakers it can produce to outside customers. Show less Identify the range of acceptable transfer prices (if any): There is not a range of acceptable transfer prices. There is a range of acceptable transfer prices as shown below: 2 Transfer price Are the managers likely to agree on a transfer price? Yes O No Complete this question by entering your answers in the tabs below. Req 1A Reg 1B Req 1C Req 1D Req 2A Req 2B Req 2c Req 2D From the standpoint of the entire company, should the transfer take place? Assume the Audio Division is selling all of the speakers it can produce to outside customers. Transfer should take place. Transfer should not take place