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Tulip Company is made up of two divisions: A and B. Division A produces a widget that Division Buses in the production of its product
Tulip Company is made up of two divisions: A and B. Division A produces a widget that Division Buses in the production of its product Variable cost per widget is $1.00; full cost is $1.50. Comparable widgets sell the open market for $2.00 each. Division A can produce up to 1.90 million widgets per year but is currently operating at only 50 percent capacity. Division B expects to use 95,000 widgets in the current year. Required: 1. Determine the minimum and maximum transfer prices. (Enter your answers to 2 decimal places.) Minimum Transfer Price Maximum Transfer Price 2. Calculate Tulip Company's total benefit of having the widgets transferred between these divisions. Total Benefit 3. If the transfer price is set at $1.00 per unit, determine how much profit Division A will make on the transfer. Determine how much Division B will save by not purchasing the widgets on the open market. (Round your answers to 2 decimal places.) per Unit Division A Profit Division B Savings per Unit 4. If the transfer price is set at $2.00 per unit, determine how much profit Division A will make on the transfer. Determine how much Division B will save by not purchasing the widgets on the open market. (Round your answers to 2 decimal places.) Division A Profit Division B Savings per Unit per Unit 2. Calculate Tulip Company's total benefit of having the widgets transferred between these divisions. Total Benefit 3. If the transfer price is set at $1.00 per unit, determine how much profit Division A will make on the transfer. Determine how much Division B will save by not purchasing the widgets on the open market. (Round your answers to 2 decimal places.) Division A Profit Division B Savings per Unit per Unit 4. If the transfer price is set at $2.00 per unit, determine how much profit Division A will make on the transfer. Determine how much Division B will save by not purchasing the widgets on the open market. (Round your answers to 2 decimal places.) Division A Profit Division B Savings per Unit per Unit 5. What transfer price would you recommend to split the difference? (Round your answer to 3 decimal places.) Mutually Beneficial Transfer Price
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