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The Atlantic Company is a multidivisional company. Its managers have full responsibility for profits and complete autonomy to accept or reject transfers from other divisions.
The Atlantic Company is a multidivisional company. Its managers have full responsibility for profits and complete autonomy to accept or reject transfers from other divisions. Division A produces a sub-assembly part for which there is a competitive market. Division B currently uses this sub-assembly for a final product that is sold outside at $2,350. Division A charges division B market price for the part, which is $1,420 per unit. Variable costs are $1,030 and $1,180 for divisions A and B, respectively. The manager of division B feels that division A should transfer the part at a lower price than market because, at market, division B is unable to make a profit. Calculate division B's contribution margin if transfers are made at the market price, and calculate the company's total contribution margin. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Division B's contribution margin $ Company's total contribution margin $ Assume that division A can sell all its production in the open market. Should division A transfer the goods to division B? If so, at what price? (If no transfer should be made, please enter O. Do not leave any fields blank.) Transfer Price $ Compare the contribution margins under three different alternatives. Assume that division A can sell in the open market only 460 of the 920 units it can produce every month, at $1,420 per unit. Assume also that a 20% reduction in price is necessary to sell all 920 units each month. Assume transfers are made and the price is maintained. Alternatives Contribution Margin Maintain price and no transfers $ Cut price and no transfers $ Maintain price and transfers $ Should transfers be made? If so, how many units should the division transfer and at what price? Units transferred units Price within the range to $
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