Sako Company's Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow: $ $ 48 20 Selling price per unit on the intermediate market Variable costs per unit Fixed costs per unit (based on capacity) Capacity in units 64,000 Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 12,000 speakers per year. It has received a quote of $35 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits. Req 1A Reg 1B Req 1C Req 1D Reg 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 now selling only 52,000 speakers per year to outside customers. Lowest acceptable transfer price Req 1A Reg 1B Reg 1C Req 1D Reg 2A Reg 2B Req 2c 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 now selling only 52,000 speakers per year to outside customers. Highest acceptable transfer price Reg 1A Reg 1B Req 1C Req 1D Reg 2A Reg 2B Reg 2C Reg 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 12,000 speakers from the Audio Division to the Hi-Fi Division? Assume the Audio Division is now selling only 52,000 speakers per year 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: s Transfer price Are the managers likely to agree on a transfer price? Yes O No Reg 1A Reg 1B Req 1C Req 1D Reg 2A Req 2B Reg 20 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 Req 1A Reg 1B Reg 1C Req 1D Reg 2A Reg 2B Req 2c 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 Reg 1A Reg 1B Reg 1C Req 1D Reg 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 12,000 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 ONO
