The Motor Division of Sym Corporation uses 5,000 carburetors per month in its production of automotive engines. It presently buys all of the carburetors it needs from two outside suppliers at an average cost of $100. The Carburetor Division of Dynamic Engine Corporation manufactures the exact type of carburetor that the Motor Division requires. The Carburetor Division is presently operating at its capacity of 15,000 units per month and sells all of its output to a foreign car manufacturer at $106 per unit. Its cost structure (on 15,000 units) is: Variable production costs $70 Variable selling costs 10 All fixed costs 10 Assume that the Carburetor Division would not incur any variable selling costs on units that are transferred internally. Questions: 1. Refer to Sym Corporation. What is the maximum of the transfer price range for a transfer between the two divisions? 2. Refer to Sym Corporation. What is the minimum of the transfer price range for a transfer between the two divisions assuming that variable selling costs is avoidable? 3. Refer to Dynamic Engine Corporation. If the two divisions agree to transact with one another, corporate profits will?
The Motor Division of Sym Corporation uses 5,000 carburetors per month in its production of automotive engines. It presently buys all of the carburetors it needs from two outside suppliers at an average cost of $100. The Carburetor Division of Dynamic Engine Corporation manufactures the exact type of carburetor that the Motor Division requires. The Carburetor Division is presently operating at its capacity of 15,000 units per month and sells all of its output to a foreign car manufacturer at $106 per unit. Its cost structure (on 15,000 units) is:
Variable production costs $70
Variable selling costs 10
All fixed costs 10
Assume that the Carburetor Division would not incur any variable selling costs on units that are transferred internally.
Questions:
1. Refer to Sym Corporation. What is the maximum of the transfer price range for a transfer between the two divisions?
2. Refer to Sym Corporation. What is the minimum of the transfer price range for a transfer between the two divisions assuming that variable selling costs is avoidable?
3. Refer to Dynamic Engine Corporation. If the two divisions agree to transact with one another, corporate profits will?
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