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 Variable costs per unit Fixed costs per unit (based on capacity) Capacity in units 24 132 114 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 $129 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits. Required: 1. Assume the Audio Division sells only 20,000 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 acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to the Hi-Fi Division? d. From the standpoint of the entire company, should the transfer take place?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
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Chapter1: Financial Statements And Business Decisions
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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
Variable costs per unit
Fixed costs per unit (based on capacity)
Capacity in units
2$
2$
%24
132
114
8
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 $129 per speaker from another manufacturer. Sako Company evaluates division managers on
the basis of divisional profits.
Required:
1. Assume the Audio Division sells only 20,000 speakers per year to outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio
Division?
C. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference,
would you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to the Hi-Fi
Division?
d. From the standpoint of the entire company, should the transfer take place?
< Prev
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Transcribed Image Text:Sako Company's Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow: Selling price per unit on the intermediate market Variable costs per unit Fixed costs per unit (based on capacity) Capacity in units 2$ 2$ %24 132 114 8 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 $129 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits. Required: 1. Assume the Audio Division sells only 20,000 speakers per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? C. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 5,000 speakers from the Audio Division to the Hi-Fi Division? d. From the standpoint of the entire company, should the transfer take place? < Prev 3 of 13 Next > 3:25 PM 4/17/202 ch hp
Req 1A and
Req 3A and
3B
Req 2A and
Req 1C
Req 1D
Req 20
Req 2D
Req 3C
Req 3D
1B
2B
Assume the Audio Division is selling 25,000 speakers per year to outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi
Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio
Division?
Show lessA
Lowest acceptable transfer price
2$
113
a.
Highest acceptable transfer price
2$
113
b.
< Req 2D
Req 3C >
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4/17/2021
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prt sc
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Transcribed Image Text:Req 1A and Req 3A and 3B Req 2A and Req 1C Req 1D Req 20 Req 2D Req 3C Req 3D 1B 2B 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? Show lessA Lowest acceptable transfer price 2$ 113 a. Highest acceptable transfer price 2$ 113 b. < Req 2D Req 3C > < Prev 3 of 13 Next > 3:26 PM (? 4/17/2021 O search hp insert prt sc fy2
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