Nelcro Company's Electrical Division produces a high-quality transformer. Sales and cost data on the transformer follow: Selling price per unit on the outside market Variable costs per unit Fixed costs per unit (based on capacity) Capacity in units $50 $20 $8 62,000 Nelcro Company has a Motor Division that would like to begin purchasing this transformer from the Electrical Division. The Motor Division is currently purchasing 10,000 transformers each year from another company at a cost of $35 per transformer. Nelcro Company evaluates its division managers on the basis of divisional profits. Required: 1. Assume that the Electrical Division is now selling only 52,000 transformers each year to outside customers. a. From the standpoint of the Electrical Division, what is the lowest acceptable transfer price for transformers sold to the Motor Division? Transfer price > 0 0 b. From the standpoint of the Motor Division, what is the highest acceptable transfer price for transformers acquired from the Electrical Division? Transfer price

Nelcro Company's Electrical Division produces a high-quality transformer. Sales and cost data on the transformer follow: Selling price per unit on the outside market Variable costs per unit Fixed costs per unit (based on capacity) Capacity in units $50 $20 $8 62,000 Nelcro Company has a Motor Division that would like to begin purchasing this transformer from the Electrical Division. The Motor Division is currently purchasing 10,000 transformers each year from another company at a cost of $35 per transformer. Nelcro Company evaluates its division managers on the basis of divisional profits. Required: 1. Assume that the Electrical Division is now selling only 52,000 transformers each year to outside customers. a. From the standpoint of the Electrical Division, what is the lowest acceptable transfer price for transformers sold to the Motor Division? Transfer price > 0 0 b. From the standpoint of the Motor Division, what is the highest acceptable transfer price for transformers acquired from the Electrical Division? Transfer price

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter13: The Balanced Scorecard: Strategic-based Control

Section: Chapter Questions

Problem 24P: Lander Parts, Inc., produces various automobile parts. In one plant, Lander has a manufacturing cell...

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Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:Selling price per unit on the intermediate market $ 80Variable costs per unit $ 62Fixed costs per unit (based on capacity) $ 8Capacity in units 25,000 Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 5,000 speakers per year. It has received a quote of $77 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits.Required: 1. Assume the Audio Division is selling 22,500 speakers per year to outside customers. A. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? B. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? C. What is the…
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Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow: Selling price per unit on the intermediate market $ 60 Variable costs per unit $ 42 Fixed costs per unit (based on capacity) $ 8 Capacity in units 25,000 Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 5,000 speakers per year. It has received a quote of $57 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits. Assume the Audio Division is selling 25,000 speakers per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? c. What is the range of…
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The Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry childrenor cargo. The trailers have a retail price of $200 each. Each trailer incurs $80 of variable manufacturingcosts. The Trailer division has capacity for 40,000 trailers per year and incurs fixed costs of $1,000,000per year. Assume the Assembly division of Baxter Bicycles wants to buy 15,000 trailers per year from the Trailer division. If the Trailer division can sell all of the trailers it manufactures to outside customers, what price should be used on transfers between Baxter Bicycles’s divisions? Explain.
Vista Company manufactures electronic equipment. It currently purchases the special switches used in each of its products from an outside supplier. The supplier charges Vista $1.45 per switch. Vista’s CEO is considering purchasing either machine A or machine B so the company can manufacture its own switches. The projected data are as follows: Machine A Machine B Annual fixed costs $ 108,900 $ 145,000 Variable cost per switch 0.46 0.20 Required: 1. For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost? 2. What volume level would produce the same total costs regardless of the machine purchased? 3. What is the most profitable alternative for producing 150,000 switches per year and what is the total cost of that alternative?
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