Sako Company's Audio Division produces a speaker that is used by manutacturers of various audio products Sales and cost data on the speaker follow: Selling price per unit on the intermediate market Variable costs per unit Fixed costs per unit (based on capacity) Capacity in units $ 108 90 $ N 25.099 Sako Company has a HI-FI Division that could use this speaker in one of its products. The HL-A Division will need 5.000 speakers per year. It has received a quote of $105 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits Required: 1. Assume the Audio Division sells only 20,000 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 fif 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 5,000 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 22.500 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 H-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 5.000 speakers from the Audio Division to the Hi-Fi Division? d. From the standpoint of the entire company should the transfer take place? Complete this question by entering your answers in the tabs below. Req 1A Req 18 Req 1C What is the lowest acceptable transfer price from the perspective of the selling division Lowest acceptable transfer price Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Reg 10 What is the highest acceptable transfer price from the perspective of the buying division? Highest acceptable transfer price Reg 1A Reg 1B Req 1C What is the range of acceptable transfer prices (if any) between the two divisions? If the managers are free to negotiate and make decisions on their own, will a transfer probably take place? 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 Transfer price s s Are the managers likely to agree on a transfer price? Ores ONO
