Gutierrez Company makes various electronic products. The company is divided into a number of autonomous divisions that can eithersell to internal units or sell externally. All divisions are located in buildings on the same piece of property. The Board Division hasoffered the Chip Division $21 per unit to supply it with chips for 40,000 boards. It has been purchasing these chips for $22 per unitfrom outside suppliers. The Chip Division receives $22.50 per unit for sales made to outside customers on this type of chip. Thevariable cost of chips sold externally by the Chip Division is $14.50. It estimates that it will save $4.50 per chip of selling expenses onunits sold internally to the Board Division. The Chip Division has no excess capacity.(a)Calculate the minimum transfer price that the Chip Division should accept. (Round answers to O decimal places. e.g. 10.)Minimum transfer price $Should Chip Division accept the offer?(b)YesSuppose that the Chip Division decides to reject the offer. What are the financial implications for each division, and for the company asa whole, of this decision?Total18Lost V contribution margin by Board DivisionTotal LostOverall Lostcontribution margin by Chip Division✓ contribution margin for the company$$$LA100

A transfer price is the amount of goods and services that are exchanged between companies under…

Should Chip Division accept the offer? (b) Yes V Suppose that the Chip Division decides to reject the offer. What are the financial implications for each division, and for the compar a whole, of this decision? Total Lost Total Lost Overall Lost contribution margin by Board Division ✓contribution margin by Chip Division ✓contribution margin for the company $ $ $

Should Chip Division accept the offer? (b) Yes V Suppose that the Chip Division decides to reject the offer. What are the financial implications for each division, and for the compar a whole, of this decision? Total Lost Total Lost Overall Lost contribution margin by Board Division ✓contribution margin by Chip Division ✓contribution margin for the company $ $ $

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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