Blue Spruce Corporation manufactures car stereos. It is a division of Berna Motors, which manufactures vehicles. Blue Spruce sells car stereos to Berna, as well as to other vehicle manufacturers and retail stores. The following information is available for Blue Spruce's standard unit: unit variable cost $36, unit fixed cost $22, and unit selling price to outside customer $85. Berna currently purchases a standard unit from an outside supplier for $80. Because of quality concerns and to ensure a reliable supply, the top management of Berna has ordered Blue Spruce to provide 164,000 units per year at a transfer price of $34 per unit. Blue Spruce is already operating at full capacity. Blue Spruce can avoid $3 per unit of variable selling costs by selling the unit internally. Answer each of the following questions. What is the minimum transfer price that Blue Spruce should accept? Minimum transfer price eTextbook and Media $ What is the potential loss to the corporation as a whole resulting from this forced transfer? Potential loss EA $
Blue Spruce Corporation manufactures car stereos. It is a division of Berna Motors, which manufactures vehicles. Blue Spruce sells car stereos to Berna, as well as to other vehicle manufacturers and retail stores. The following information is available for Blue Spruce's standard unit: unit variable cost $36, unit fixed cost $22, and unit selling price to outside customer $85. Berna currently purchases a standard unit from an outside supplier for $80. Because of quality concerns and to ensure a reliable supply, the top management of Berna has ordered Blue Spruce to provide 164,000 units per year at a transfer price of $34 per unit. Blue Spruce is already operating at full capacity. Blue Spruce can avoid $3 per unit of variable selling costs by selling the unit internally. Answer each of the following questions. What is the minimum transfer price that Blue Spruce should accept? Minimum transfer price eTextbook and Media $ What is the potential loss to the corporation as a whole resulting from this forced transfer? Potential loss EA $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Blue Spruce Corporation manufactures car stereos. It is a division of Berna Motors, which manufactures vehicles. Blue Spruce sells car
stereos to Berna, as well as to other vehicle manufacturers and retail stores. The following information is available for Blue Spruce's
standard unit: unit variable cost $36, unit fixed cost $22, and unit selling price to outside customer $85. Berna currently purchases a
standard unit from an outside supplier for $80. Because of quality concerns and to ensure a reliable supply, the top management of
Berna has ordered Blue Spruce to provide 164,000 units per year at a transfer price of $34 per unit. Blue Spruce is already operating
at full capacity. Blue Spruce can avoid $3 per unit of variable selling costs by selling the unit internally.
Answer each of the following questions.
What is the minimum transfer price that Blue Spruce should accept?
Minimum transfer price
eTextbook and Media
$
What is the potential loss to the corporation as a whole resulting from this forced transfer?
Potential loss
EA
$
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