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Bramble Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $10 from an outside vendor. Division A needs 12,800 lamps for the coming year. Division B has the capacity to manufacture 64,000 lamps annually. Sales to outside customers are estimated at 51,200 lamps for the next year. Reading lamps are sold at $12 each. Variable costs are $7 per lamp and include $2 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $102,400. Consider the following independent situations. (a) What should be the minimum transfer price accepted by Division B for the 12,800 lamps and the maximum transfer price paid by Division A? Minimum transfer price accepted by Division B Maximum transfer price paid by Division A $ $ per unit per unit

Bramble Inc. has two divisions. Division A makes and sells student desks. Division B manufactures and sells reading lamps. Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $10 from an outside vendor. Division A needs 12,800 lamps for the coming year. Division B has the capacity to manufacture 64,000 lamps annually. Sales to outside customers are estimated at 51,200 lamps for the next year. Reading lamps are sold at $12 each. Variable costs are $7 per lamp and include $2 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $102,400. Consider the following independent situations. (a) What should be the minimum transfer price accepted by Division B for the 12,800 lamps and the maximum transfer price paid by Division A? Minimum transfer price accepted by Division B Maximum transfer price paid by Division A $ $ per unit per unit

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Bramble Inc. has two divisions. Division A makes and sells student desks, Division B manufactures and sells reading lamps. Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $10 from an outside vendor. Division A needs 12,800 lamps for the coming year. Division B has the capacity to manufacture 64,000 lamps annually. Sales to outside customers are estimated at 51,200 lamps for the next year. Reading lamps are sold at $12 each. Variable costs are $7 per lamp and include $2 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $102,400. Consider the following independent situations. (a) What should be the minimum transfer price accepted by Division B for the 12,800 lamps and the maximum transfer price paid by Division A? Minimum transfer price accepted by Division B $ Maximum transfer price paid by Division A $ per unit per unit
Transcribed Image Text:Bramble Inc. has two divisions. Division A makes and sells student desks, Division B manufactures and sells reading lamps. Each desk has a reading lamp as one of its components. Division A can purchase reading lamps at a cost of $10 from an outside vendor. Division A needs 12,800 lamps for the coming year. Division B has the capacity to manufacture 64,000 lamps annually. Sales to outside customers are estimated at 51,200 lamps for the next year. Reading lamps are sold at $12 each. Variable costs are $7 per lamp and include $2 of variable sales costs that are not incurred if lamps are sold internally to Division A. The total amount of fixed costs for Division B is $102,400. Consider the following independent situations. (a) What should be the minimum transfer price accepted by Division B for the 12,800 lamps and the maximum transfer price paid by Division A? Minimum transfer price accepted by Division B $ Maximum transfer price paid by Division A $ per unit per unit
Suppose Division B could use the excess capacity to produce and sell externally 19,200 units of a new product at a unit selling price of $7. The unit variable cost for this new product is $5. What should be the minimum transfer price accepted by Division B for the 12,800 lamps and the maximum transfer price paid by Division A? Minimum transfer price accepted by Division B Maximum transfer price paid by Division A eTextbook and Media Save for Later Using multiple attempts will impact your score. 10% score reduction after attempt 2 (c). $ $ Maximum transfer price paid by Division A Minimum transfer price accepted by Division B $ per unit per unit If Division A needs 16,000 lamps instead of 12,800 during the next year, what should be the minimum transfer price accepted by Division B and the maximum transfer price paid by Division A? (Round answers to 2 decimal places, e.g. 10.50.) per unit Attempts: 0 of 3 used Submit Answer per unit
Transcribed Image Text:Suppose Division B could use the excess capacity to produce and sell externally 19,200 units of a new product at a unit selling price of $7. The unit variable cost for this new product is $5. What should be the minimum transfer price accepted by Division B for the 12,800 lamps and the maximum transfer price paid by Division A? Minimum transfer price accepted by Division B Maximum transfer price paid by Division A eTextbook and Media Save for Later Using multiple attempts will impact your score. 10% score reduction after attempt 2 (c). $ $ Maximum transfer price paid by Division A Minimum transfer price accepted by Division B $ per unit per unit If Division A needs 16,000 lamps instead of 12,800 during the next year, what should be the minimum transfer price accepted by Division B and the maximum transfer price paid by Division A? (Round answers to 2 decimal places, e.g. 10.50.) per unit Attempts: 0 of 3 used Submit Answer per unit
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