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Sheffield Corporation manufactures car stereos. It is a division of Waterway Motors, which manufactures vehicles. Sheffield sells car stereos to Waterway, as well as to
Sheffield Corporation manufactures car stereos. It is a division of Waterway Motors, which manufactures vehicles. Sheffield sells car stereos to Waterway, as well as to other vehicle manufacturers and retail stores. The following information is available for Sheffield's standard unit: variable cost per unit $37, fixed cost per unit $23, and selling price to outside customer $96. Waterway currently purchases a standard unit from an outside supplier for $89. Because of quality concerns and to ensure a reliable supply, the top management of Waterway has ordered Sheffield to provide 191,000 units per year at a transfer price of $35 per unit. Sheffield is already operating at full capacity. Sheffield can avoid $2 per unit of variable selling costs by selling the unit internally. Answer each of the following questions. Your answer is incorrect. What is the minimum transfer price that Sheffield should accept? Minimum transfer price $ Your answer is incorrect. What is the potential loss to the corporation as a whole resulting from this forced transfer? Potential loss
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