Quail Company produces outdoor gear. Salter is a division of Quail that manufactures unbreakable zippers used in Quail's gear and sold to other manufacturers. Cost information per zipper follows: Variable cost Full cost Market price $ 1.60 2.20 5.00 In addition, Salter's capacity data follow: Capacity per year Current production level Required: 2,000,000 zippers 1,500,000 zippers 1. Assuming Quail produces 300,000 sleeping bags per year, what is the overall benefit of using zippers from Salter instead of purchasing them externally? 2. Determine the maximum price the sleeping bag production facility would be willing to pay to purchase the zippers from Salter. 3. Determine the minimum price Salter will accept as a transfer price. Note: Round your answer to 1 decimal place. 4. Determine the mutually beneficial transfer price for the zippers. Note: Round your answer to 1 decimal place. 5. If Salter were operating at capacity, what is the minimum price it would accept? Answer is complete but not entirely correct. $ 1. Total savings with Quail putters 1,020,000 2. Maximum price Quail would pay Salter $ 3 x 3. Minimum price Salter will accept $ 1.6 4. Mutually beneficial price $ 2.2 x 5. Minimum price Salter would accept at capacity $ 5
Quail Company produces outdoor gear. Salter is a division of Quail that manufactures unbreakable zippers used in Quail's gear and sold to other manufacturers. Cost information per zipper follows: Variable cost Full cost Market price $ 1.60 2.20 5.00 In addition, Salter's capacity data follow: Capacity per year Current production level Required: 2,000,000 zippers 1,500,000 zippers 1. Assuming Quail produces 300,000 sleeping bags per year, what is the overall benefit of using zippers from Salter instead of purchasing them externally? 2. Determine the maximum price the sleeping bag production facility would be willing to pay to purchase the zippers from Salter. 3. Determine the minimum price Salter will accept as a transfer price. Note: Round your answer to 1 decimal place. 4. Determine the mutually beneficial transfer price for the zippers. Note: Round your answer to 1 decimal place. 5. If Salter were operating at capacity, what is the minimum price it would accept? Answer is complete but not entirely correct. $ 1. Total savings with Quail putters 1,020,000 2. Maximum price Quail would pay Salter $ 3 x 3. Minimum price Salter will accept $ 1.6 4. Mutually beneficial price $ 2.2 x 5. Minimum price Salter would accept at capacity $ 5
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Quail Company produces outdoor gear. Salter is a division of Quail that manufactures unbreakable zippers used in Quail's gear and
sold to other manufacturers. Cost information per zipper follows:
Variable cost
Full cost
Market price
$ 1.60
2.20
5.00
In addition, Salter's capacity data follow:
Capacity per year
Current production level
Required:
2,000,000 zippers
1,500,000 zippers
1. Assuming Quail produces 300,000 sleeping bags per year, what is the overall benefit of using zippers from Salter instead of
purchasing them externally?
2. Determine the maximum price the sleeping bag production facility would be willing to pay to purchase the zippers from Salter.
3. Determine the minimum price Salter will accept as a transfer price.
Note: Round your answer to 1 decimal place.
4. Determine the mutually beneficial transfer price for the zippers.
Note: Round your answer to 1 decimal place.
5. If Salter were operating at capacity, what is the minimum price it would accept?
Answer is complete but not entirely correct.
$
1. Total savings with Quail putters
1,020,000
2. Maximum price Quail would pay Salter
$
3 x
3. Minimum price Salter will accept
$
1.6
4. Mutually beneficial price
$
2.2 x
5. Minimum price Salter would accept at capacity
$
5
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