Question
Wiring used by the Appliance Division of Childs Manufacturing is currently purchased from outside suppliers at a cost of $12.50 per unit. However, the same
Wiring used by the Appliance Division of Childs Manufacturing is currently purchased from outside suppliers at a cost of $12.50 per unit. However, the same materials are available from the Electronic Division. The Electronic Division has unused capacity and can produce the materials needed by the Appliance Division at a variable cost of $10 per unit. Assume that a transfer price of $11 has been established and that 75,000 units of materials are transferred, with no reduction in the Electronic Division's current sales. a. How much would Childs Manufacturing's total operating income increase? $fill in the blank 1 b. How much would the Appliance Division's operating income increase? $fill in the blank 2 c. How much would the Electronic Division's operating income increase? $fill in the blank 3 d. If the negotiated price approach is used, what would be the range of acceptable transfer prices and why?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started