Question
The materials used by Twix Company's Division Left are currently purchased from an outside supplier at $54 per unit. Division Right is able to supply
The materials used by Twix Company's Division Left are currently purchased from an outside supplier at $54 per unit. Division Right is able to supply Division Left with 18,400 units at a variable cost of $52 per unit. The two divisions have recently negotiated a transfer price of $51 per unit for the 18,400 units. Enter an increase as a positive number and a decrease as a negative number.
a. By how much will each divisions income increase as a result of this transfer? Division Left Division Right
b. What is the total increase in income for Twix Company?
c. Did one division make a mistake when negotiating the transfer price? Yes or No
. d. If there one division made a mistake, which division negotiated poorly? If both divisions negotiated a fair price, enter "fair". If one division made a mistake, identify the division.
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