In each of the cases below, assume Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits. Division X: Capacity in units Number of units being sold to outside customers Selling price per unit to outside customers Variable costs per unit Fixed costs per unit (based on capacity) Division Y: Number of units needed for production Purchase price per unit now being paid to an outside supplier A Case 95,000 95,000 $51 $22 $10 15,000 $44 B 97,000 82,000 $33 $18 $6 15,000 $36
In each of the cases below, assume Division X has a product that can be sold either to outside customers or to Division Y of the same company for use in its production process. The managers of the divisions are evaluated based on their divisional profits. Division X: Capacity in units Number of units being sold to outside customers Selling price per unit to outside customers Variable costs per unit Fixed costs per unit (based on capacity) Division Y: Number of units needed for production Purchase price per unit now being paid to an outside supplier A Case 95,000 95,000 $51 $22 $10 15,000 $44 B 97,000 82,000 $33 $18 $6 15,000 $36
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
D1.
Transcribed Image Text:In each of the cases below, assume Division X has a product that can be sold either to outside
customers or to Division Y of the same company for use in its production process. The managers of
the divisions are evaluated based on their divisional profits.
Division X:
Capacity in units
Number of units being sold to outside customers
Selling price per unit to outside customers
Variable costs per unit
Fixed costs per unit (based on capacity)
Division Y:
Number of units needed for production
Purchase price per unit now being paid to an outside
supplier
A
Case
95,000
95,000
$51
$22
$ 10
15,000
$44
B
97,000
82,000
$33
$18
$6
15,000
$36
Transcribed Image Text:Req 1A
Req 1B
What is the lowest acceptable transfer price from the perspective of the selling division?
Lowest acceptable transfer price
Show Transcribed Text
Req 1A
Req 1C
Req 1B
Req 1C
What is the highest acceptable transfer price from the perspective of the buying division?
Highest acceptable transfer price
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