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value 3.63 points Problem 15-35 Transfer Pricing with Imperfect Markets: RI Evaluation, Normal Costing (LO 15-2) Oxford Company has two divisions. Thames Division, which has
value 3.63 points Problem 15-35 Transfer Pricing with Imperfect Markets: RI Evaluation, Normal Costing (LO 15-2) Oxford Company has two divisions. Thames Division, which has an investment base of $80,600,000, produces and sells 910,000 units of a product at a market price of $149 per unit. Its variable costs total $42 per unit. The division also charges each unit $71 of fixed costs based on a capacity of 1,100,000 units. Lakes Division wants to purchase 210,000 units from Thames. However, it is willing to pay only $81 per unit because it has an opportunity to accept a special order at a reduced price. The order is economically justifiable only if Lakes can acquire Thames' output at a reduced price. Division managers are evaluated using residual income using a 12 percent cost of capital Required a. What is the residual income for Thames without the transfer to Lakes? Residual income
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