Question
The Motor Division of Super Truck Co. uses 5,000 carburetors per month in its production of automotive engines. It presently buys all of the carburetors
The Motor Division of Super Truck Co. uses 5,000 carburetors per month in its production of automotive engines. It presently buys all of the carburetors it needs from two outside suppliers at an average cost of $100. The Carburetor Division of Super Truck Co. manufactures the exact type of carburetor that the Motor Division requires. The Carburetor Division is presently operating at its capacity of 15,000 units per month and sells all of its output to a foreign car manufacturer at $106 per unit. Its cost structure (on 15,000 units) is:
Variable production costs: $70 Variable selling costs: $10 All fixed costs: $10 Fixed selling & Admin: $8
Assume that the Carburetor Division would not incur any variable selling and administrative costs on units that are transferred internally.
1. The maximum transfer price would be $___ per unit. 2. The minimum transfer price would be $___ per unit. 3. Assume that the selling division is producing and selling 9,000 units to outside customers, the minimum transfer price is $___ per unit. 4. Assume that the selling division is producing and selling 12,000 units to outside customers, the minimum transfer price is $___ per unit to (the nearest centavo or hundredths) 5. The transfer price based on Variable Costs would be $___ per unit. 6. The transfer price based on Full Production costs would be $___ per unit.
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