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When June and Jerry started their business, Metlock Inc., their mission was simple: to provide a quiet, round - trip ride to hundreds of office
When June and Jerry started their business, Metlock Inc., their mission was simple: to provide a quiet, roundtrip ride to hundreds of
office workers so they could work during the commute. At the beginning, they had enough capacity to accommodate all interested
customers. But as this idea gained popularity, there was demand they couldn't meetand not just by commuters, but also by travelers
heading to and from the airport.
June and Jerry organized their growing business into geographical segments, evaluating each on its operating income and profit
margin. The two owners retained control of asset purchases. June and Jerry still intended for their segment managers to work
together, helping each other with capacity needs when required. Such participation was left up to the segment managers, though. All
three segments had the same variable and absorption cost for an average twoway trip, at $ and $ per customer, respectively.
Since the culture in this company was very open, each manager was aware of the other segments' similar cost structures.
The Airport segment's drivers were already prebooked for the upcoming holiday weekend, and there was a steady stream of calls
coming in with more requests for this service. Naturally, the Airport segment manager called on both the Hawthorn and Bolton
segments to ask for help. Hawthorn had some capacity, but Bolton was prebooked with its own repeat customers.
Listed below are the average rates to provide twoway transportation services to one person or two people rate was the same in
each geographic area. If you managed the Airport segment, how much would you offer to pay the Hawthorn segment for these services?
Transfer price
$
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